MRR and ARR for agencies: tracking recurring revenue

The metric that turns an agency into a business

Most agencies start as a treadmill: every month begins at zero, you sell to refill the bucket, and the founder is the bottleneck for both delivery and sales. The single metric that breaks the cycle is monthly recurring revenue (MRR) - the predictable, contracted income you can count on next month before anyone picks up the phone. The bigger your MRR, the less of each month is spent re-selling work you've already done.

For software companies MRR is the whole business; for agencies it's usually a slice. But it's the slice that decides whether you can plan, hire, and survive a slow quarter - so tracking it deliberately changes how the agency runs.

How to calculate MRR (when your revenue is mixed)

The clean definition: MRR is the sum of all contracted, recurring revenue, normalised to a monthly figure. Practically:

MRR = sum of all active retainers (monthly fees)
    + (sum of annual subscriptions ÷ 12)
    - any discounts currently being honoured

What it specifically excludes: one-off project fees, kill fees, late-payment recoveries, and "they'll probably renew" guesses. If it isn't contracted and recurring, it isn't MRR. That discipline is the whole point - you want a number you can defend in a budget meeting, not an aspirational one.

ARR is MRR × 12. It's mostly useful for annual planning and conversations with people who think in years (investors, accountants). It's the same number, just framed for a longer horizon.

What good looks like

There's no single benchmark, but useful guideposts:

• MRR as a share of total revenue. Project-heavy agencies sit below 30%; mature agencies often run 50-70%. The higher the share, the more predictable the business.
• MRR growth rate. Healthy agencies grow MRR by a few percent a month, mostly through expansion of existing accounts (NRR doing the work). A flat or shrinking MRR means churn is matching new sales.
• Concentration risk. If one client is more than ~20% of MRR, that's not predictable revenue, it's one phone call from a bad quarter.

If you're project-heavy, the goal isn't necessarily 100% recurring - it's enough recurring to cover your base costs, so project revenue becomes profit on top rather than survival.

The levers that grow MRR

Three reliable ones:

1. Convert project clients to retainers. The easiest sale you'll make. A project client who liked the work and asks "what's next?" is your highest-converting retainer prospect - see agency retainer pricing.
2. Productize. A repeatable, fixed-scope package sold on a monthly cycle is recurring revenue with a defined cost to deliver - see productized services for agencies.
3. Expand existing accounts. Growing what an existing client buys is cheaper than winning new ones, and shows up directly in net revenue retention and ARPA.

For the full picture of how MRR sits alongside margin, LTV, CAC and cash, see the agency finance guide.