Monthly recurring revenue: The guide for UK businesses

Samir Kamnani

·

April 3, 2025

For ecommerce businesses that charge ongoing subscription or membership fees, there are two distinct metrics that you should focus on to analyse the health of your customer base: gross recurring revenue (GRR), and monthly recurring revenue (MRR).

In a previous article, we walked through how to define your GRR, which refers to the percent of revenue retained from existing customers over a set period of time. In this one, we’ll focus on a related, but distinct, metric: MRR, which includes all of the monthly recurring revenue from your customers.

By understanding your MRR, you’ll have a better sense of your revenue forecast, and be able to determine your customer growth, churn, and retention rates.

Here’s what you should know.

How do you calculate your MRR?

You can use a simple formula to calculate your MRR:

MRR = Total Number of Customers × Average Revenue Per User (ARPU)

Unlike your GRR, which only includes revenue from existing customers, MRR factors in revenue from all your customers, including new subscriptions. Your MRR factors in newly acquired memberships, expansions (upsells, add-ons, and plan upgrades), and churned subscriptions. During each new period (i.e., monthly or quarterly), you can calculate your “net new MRR” by calculating the total change in MRR from the previous period after accounting for each of these numbers.

Why is MRR important?

Understanding your MRR, and the metrics associated with it, can give you greater insight into how well your business is performing. You’ll be able to build more accurate revenue forecasts, understand whether you’re losing or gaining customers, and use your data to optimise your business strategy.

You can drill down into your MRR data to analyse various trends around your business performance, including:

• % of revenue from new shoppers
• % of expansion MRR, from add-ons and upgrades
• % of revenue lost due to subscription cancellations
• % of revenue from “reactivations” (customers who previously cancelled, but have restarted their subscriptions)
• % of contractions (downgrades from active subscribers)

Analysing the data associated with each of these trends will give you better indications around what your business is doing well or poorly. You’ll be able to understand how your customer base responds to changing conditions and initiatives: For instance, a competitor offered a lower-priced subscription offering that’s similar to yours—and your cancellation rate is 8% higher than average in the following month. Or say your brand just spent £30,000 in a month on a multi-channel ad campaign to promote your subscription offering, and your % of new revenue was up by 15%. While you should be able to more directly attribute the growth based on each advertising channel, your “new revenue MRR” should give a good overview of the campaign’s success overall.

Tying these, and other elements together, can help you get a holistic look at how your brand’s initiatives and changing market conditions can impact your MRR, for better or worse.

Building recurring revenue is top of mind for UK brands in 2025 (and beyond)

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How to improve your MRR

Unlike GRR, which focuses on retention, MRR factors in acquisition and retention. As such, optimising your MRR involves both improving your acquisition strategies and boosting recurring revenue in ecommerce. Your strategy will be highly dependant on your brand, including your customer demographics and price point, but these tips will help you build a sustainable growth and retention plan:

• Boosting new MRR
  • Use A/B testing to optimise your brand creative and offers: Experiment with different copy, ad creative, and website layout designs to see which ones are most likely to convert new customers who are viewing your site or ad campaigns. You may even consider varying your offers to see which ones shoppers are most likely to sign up for: If you raise your subscription price by £3 for one customer segment, would it have a detrimental effect on sales, or will you see the same rates as you do in your control group? Once you’ve had the chance to iterate on numerous versions of your creative and offers, you can promote a winning combination that helps you boost your new customer revenue through increased conversions and/or higher pricing.
  • Build an organic social and content marketing strategy: Generating inbound leads through social media and content marketing is more sustainable than paid advertising, but it can take some time to net results. Start early by honing your target demographic and planning a content strategy designed to appeal to their interests. As you begin producing content, promote it on channels they engage with (such as Instagram or TikTok). 
  • Invest (wisely) in paid advertisements: Ad spend can get pricey, but it’s also the fastest way to net new subscribers. Build and measure a targeted ad strategy, keeping track of your ROI from each campaign and each channel. Use your data to help you optimise your campaigns so that you can focus on the most effective marketing channels.
• Growing expansion MRR
  • Experiment with recommended add-ons: To generate more revenue from existing subscribers, consider recommending optional add-ons to their existing package, such as products that are complementary to the ones in their subscription box, or premium services like Loop’s Offset, which guarantees free return shipping if the shopper needs it.
• Reducing churn
  • Build a loyalty programme: To increase customer retention, provide offers for special perks or discounts for customers who’ve subscribed for a certain length of time, and show them upcoming milestones to keep them engaged.
  • Improve your customer service: Customers often churn due to poor customer support. Try chatbot technology to help your customers solve problems more quickly, freeing up your support agents to respond to issues that require escalation.
  • Optimise the post-purchase experience: Order tracking and the returns process often fall flat for customers. To combat this, provide shoppers with the tools to track their order status in real-time, and implement a returns management solution that enables them to initiate their own returns for a streamlined experience.

With the right technology tools and data at hand, your brand will be able to boost its MRR through a combination of higher customer growth and increased retention, helping you foster a more sustainable growth strategy for the long term.

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