Committed Monthly Recurring Revenue (CMRR) in B2B SaaS

Knowing how much revenue your SaaS company will generate in a month sounds ideal. Yet, many B2B SaaS business owners struggle with forecasting their revenue.

Often, relying solely on monthly recurring revenue (MRR) will not fully account for churn, downgrades, or committed deals. That’s where Committed Monthly Recurring Revenue (CMRR) comes in.

Unlike standard MRR, CMRR provides a more predictable, forward-looking metric that takes into account committed revenue changes. This makes it an essential metric for budgeting, financial planning, and business stability in the SaaS industry. 

According to Younium, B2B SaaS businesses should follow the ASC 606 and IFRS 15 standards to record revenue and obtain better CMRR data.

Imagine making key business decisions with complete confidence — that’s an advantage CMRR gives. So, how does CMRR work, and why is it a better metric for revenue predictability? Let’s break it down.

What is Committed Monthly Recurring Revenue (CMRR)?

Before we get into CMRR, let’s clearly understand what Monthly Recurring Revenue stands for. MRR represents the monthly predictable revenue a SaaS business generates from its active subscriptions. 

It’s an important metric for tracking revenue trends, still, it has one major limitation and doesn’t account for future changes, such as customer upgrades, downgrades, or cancellations, which are crucial for accurate revenue recognition. 

Committed Monthly Recurring Revenue, on the other hand, offers a clearer projection of future revenue by factoring:

• New committed revenue from upcoming subscriptions
• Expansion revenue from upsells and plan upgrades
• Revenue reductions due to customer churn and downgrades

By incorporating these elements, CMRR provides a clearer and more accurate projection of your company’s future cash flow, enabling you to make informed budgeting and financial decisions.

Why CMRR is Essential

CMRR goes beyond standard MRR by incorporating committed revenue changes, giving your SaaS business a more reliable financial outlook and supporting more effective SaaS management. Here’s how:

• More accurate revenue forecasting: Unlike MRR, CMRR factors in committed revenue changes, providing a clearer picture of future cash flow
• Stronger financial planning: Investors, stakeholders, and 409A valuation firms can use CMRR to assess a business’ financial health and long-term stability
• Better budgeting decisions: Knowing how much revenue is locked in allows for smarter expense management and resource allocation

Understanding CMRR Components

To calculate Committed Monthly Recurring Revenue accurately, you need to understand the following key elements:

• New MRR: The recurring revenue gained from brand-new customers who signed up for a paid plan within the month. This reflects the new revenue added to your business.
• Expansion MRR: Additional revenue generated from existing customers who upgrade to higher-tier plans or purchase add-ons. This is a strong indicator of customer satisfaction and potential for growth.
• Churned MRR: The revenue lost when customers cancel their subscriptions. High churn rates negatively impact CMRR and signal potential issues with product value or customer retention.
• Contraction MRR: Revenue reduction from existing customers downgrading their plans. While not as severe as churn, frequent downgrades can indicate pricing misalignment or a decline in product usage.

Best Practices for Tracking and Improving CMRR

By implementing the right strategies, you can minimize revenue loss, improve retention, and drive sustainable expansion with the following best practices:

1. Use Advanced Subscription Analytics Tools

Accurate CMRR tracking starts with real-time data visibility. Without the right tools, you might miss revenue fluctuations that impact long-term financial planning.

Many of the best recurring billing software solutions include built-in CMRR tracking which helps you monitor MRR changes, churn trends, and upsell opportunities more effectively. 

2. Reduce Churn with Proactive Retention Strategies

Churn doesn’t just hurt MRR, it weakens future revenue stability. Retaining customers means securing a predictable cash flow and enhancing their lifetime value.

To minimize churn:

• Identify at-risk customers early by tracking engagement levels and product usage
• Offer long-term incentives like annual discounts or customized renewal plans
• Strengthen customer success efforts to proactively resolve issues before cancellations happen

3. Increase Expansion MRR with Strategic Upsells

Growing revenue isn’t only about new acquisitions, it’s also about maximizing customer lifetime value. Encouraging upgrades and add-ons can significantly boost CMRR.

To drive expansion revenue:

• Introduce upsell opportunities when customers approach usage limits
• Offer compelling tiered pricing plans that highlight the value of upgrading
• Use personalized recommendations to suggest relevant add-ons or premium features

How to Calculate CMRR

To get an accurate view of your company’s predictable revenue, you need to calculate CMRR using this formula:

CMRR = MRR + New MRR + Expansion MRR − Churned MRR − Contraction MRR

Where:

• MRR: Recurring revenue from active subscriptions
• New MRR: Revenue from new customers
• Expansion MRR: Additional revenue from upgrades or add-ons
• Churned MRR: Revenue lost from cancellations
• Contraction MRR: Revenue lost from downgrades

For example, your SaaS company has the following revenue components:

Based on your current commitments and expected losses, this means you can confidently project $55,000 in recurring revenue moving forward.

Conclusion

If you’re unsure of how to choose accounting software, focus on solutions that support subscription-based revenue models, automate revenue recognition, and seamlessly integrate with your billing system.

As a B2B SaaS business owner, CMRR is a window into your company’s future. It shows where your revenue stands today and where it’s headed. Overlooking CMRR means risking inaccurate forecasts, unexpected revenue gaps, and missed opportunities for expansion. 

To build a resilient SaaS company, sustainability and growth lie in predictable revenue, so, start optimizing your CMRR tracking today and take charge of your financial future.