How to Strategically Grow Your New, Reactivated and Expansion MRR

Setting up and building your subscription business is challenging, yet it is very rewarding.

The huge benefit of a subscription business is recurring revenue which is something that is pretty consistent and won’t normally go anywhere out of nowhere.

Recurring revenue will withstand seasonality, get your business through slow or challenging times and will give you a sense of stability.

One of the most useful and rewarding success metrics is its monthly recurring revenue as well as its growth:

What is MRR?

MRR (monthly recurring revenue) is the total income you expect to generate from your monthly subscription users.

MRR is the fundamental SaaS metric allowing you to estimate the health of your company and plan its growth.

What are Different Types of MRR?

• Existing MRR: Monthly revenue from your current users. Assuming, you will not lose or gain any new customers, this is your monthly revenue. This is your baseline to grow from.
• New MRR: This is MRR generated by new customers.
• Reactivated MRR: This is MRR generated by customers who come back to use the product.
• Expansion MRR: This is additional MRR from existing customers.

There are also two types of lost MRR:

• Contraction MRR: Lost MRR from customers who downgraded (so they are paying you less money now)
• Churned MRR: Lost MRR from customers who’ve canceled their subscription

But in this article we are focusing on all the activities to grow your MRR, and while decreasing your lost MRR is very important, it is a topic of different articles which you can find here:

• Leading Causes of Churn for SaaS Companies
• Revenue Retention – PayKickstart
• Top 5 Reasons for Customer Churn + Fixes for Each
• Combating Voluntary vs Involuntary Churn
• Why Addressing Delinquent Churn Should Be Priority #1

How to Calculate Your MRR

Knowing your current MRR is the first step here: You need to know what you are working to grow.

Your MMR is calculated by multiplying your total number of users by the amount of money your monthly package costs:

Your MRR = (Number of your plan subscribers) X (cost of that plan)

If you have several plans, MRR normalizes your revenue:

Your MRR = (Number of plan#1 subscribers) X (cost of plan#1) + (Number of plan#2 subscribers) X (cost of plan#2) + (Number of plan#3 subscribers) X (cost of plan#3) …

Or:

Your MRR = (Number of customers) x (average revenue per user)

Another useful metric is called Net MRR that takes into account your losses:

Net new MRR = (new MRR) + (expansion MRR) + (reactivation MRR) – (churned MRR) – (contraction MRR)

How to Grow Your MRR Strategically

Knowing your baseline is helpful because now you can focus on growing your monthly recurring business. Here’s how:

New MRR: Invest Into Marketing

Attracting new customers to your SaaS business is an ongoing method. Digital marketing consists of three main branches allowing SaaS businesses to generate web traffic and convert those new clicks into users:

• Search engine optimization
• Social media marketing (SMM)
• Pay-Per-Click ads (both in search and social media)

To give you a good idea on how these three methods align, here’s a quick chart:

One big aspect of SEO is that the longer you invest in it, the higher the growth (due to the ever-growing authority and trust of the site in the eyes of Google). So the longer you do SEO, the less you have to invest in it while still seeing the growth.

When it comes to PPC and social media, both yield results only as long as you actively engage in them.

Further reading:

• How to Use Email Marketing to Grow Your Subscription Customer Base
• 4 Ways to Use Email Marketing to Engage Customers 

Reactivated MRR: Re-Engage Your Inactive Customers

Engaging your inactive or canceled customers is a great way to grow your reactivated MRR, and the most effective way to do that is using email marketing.

Send out regular emails to a separate segment to reach your inactive customers offering them special offers or alerting them of new popular features.

Make sure to time and personalize your emails well to reach more of your customers.

PaykickStart supports multiple email marketing automation platforms which you can use to set up your newsletter, including GetResponse, AWeber, MailChimp and many others:

If you are into account-based sales, make sure to follow up via the phone. The cost of business line is extremely low these days, and in certain niches it remains the most effective communication method.

Further reading: Launching Hacks: How to Get Your First SaaS Users

Expansion MRR: Create an Upselling Strategy

Upselling is the fundamental tactic behind increasing your expansion MRR. If you do it right, upselling can also increase your brand loyalty because customers who buy more are those that already love your product.

There are different ways to implement upselling into SaaS business including offering a premium setup and maintenance services, creating premium customer support addon and selling ongoing training.

Using PayKickstart, you can easily set up your upsells using order bumps and one-click upsells.

Further reading: 10 Proven Strategies to Increase MRR for Your SaaS

Calculating Your MRR Growth

Hopefully, your strategy will include all of the above activities, but what really matters is keeping an eye on your growth.

The MRR Growth Rate refers to the change in MRR compared to a previous period in time.

Conclusion

Growing your monthly revenue takes time and a lot of effort but it is very rewarding because MRR is one of the most consistent metrics in business, so once you increase it, it will remain the same, provided you create a solid subscription relationship management strategy.

Ann Smarty

Ann Smarty is the Brand Manager at Internet Marketing Ninjas, as well as co-founder of Viral Content Bee. Ann has been into Internet Marketing for over a decade, she is the former Editor-in-Chief of Search Engine Journal and contributor to prominent search and social blogs including Small Biz Trends and Mashable. Ann is also the frequent speaker at Pubcon and the host of a weekly Twitter chat #vcbuzz

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