Growth benchmarks change throughout the life of a SaaS business, as well as the tactics and considerations used to fuel that growth. What moves the needle one day may not a year or even a few months later.
Every business, no matter what industry or how established, has moments when increasing revenue seems difficult. With that in mind, here are nine ways SaaS businesses can increase monthly recurring revenue. Read on to find the ones most relevant to your specific business needs and areas of opportunity.
What's in this article?
- What is monthly recurring revenue (MRR)?
- How to calculate MRR
- How understanding your MRR helps your business
- How to increase MRR:
- Optimise and update your pricing and billing models.
- Facilitate and encourage movement to preferred pricing plans and tiers.
- Improve your dunning management.
- Refresh your product and subscription catalogue.
- Offer – and advertise – discounts.
- Create custom landing pages.
- Expand upmarket.
- Upsell users who are on free plans.
- Track performance with detailed reporting – and act on what your analytics tell you.
- Optimise and update your pricing and billing models.
What is monthly recurring revenue (MRR)?
Monthly recurring revenue (MRR) is all the revenue a business expects to generate each month. MRR is a key metric for businesses that sell subscriptions and memberships.
How to calculate MRR
MRR specifically refers to revenue that is predicted to come into a business on a recurring basis, often from customer contracts relating to subscriptions and memberships. To calculate MRR, you need to first figure out your average revenue per account (ARPA). This is particularly important for businesses that sell different membership tiers or subscriptions for different levels of usage or access.
ARPA is calculated like this:
Total amount of revenue divided by total number of customers = ARPA
MRR is calculated like this:
Average revenue per account multiplied by the total number of customers per month = MRR
For example, if your business sells software subscriptions, and you have 1,000 customers paying £60 per month, your MRR is £60,000.
How understanding your MRR helps your business
Keeping an eye on your MRR is as valuable for C-suite executives as it is for accounting managers and sales reps. Alongside other metrics, such as growth rate, retention and churn, MRR offers visibility into the overall health and performance of the business.
Understanding MRR can be instructive on a number of key fronts, including:
- Projecting sales goals
- Tracking performance of various initiatives, from product development to sales to marketing
- Anticipating cash flow during any given period
- Understanding seasonality in your business
- Analysing performance variations between customer segments
- Budgeting and financial planning
How to increase MRR
Not every method of increasing MRR will make a difference for every SaaS business, but the following nine simple tactics apply to most subscription models in most cases:
Optimise and update your pricing and billing models.
Supporting a wide range of pricing models keeps your business agile and accommodating as it grows. Flexible billing logic with Stripe makes it easy to experiment with new pricing structures, improve revenue, and develop new revenue streams by quickly launching new services and products.
Pricing options include:
- Flat-rate pricing
- Good-better-best pricing
- Per-seat pricing
- Usage-based pricing
- Tiered pricing
- Multiple prices
- Multiple products in a subscription
For more detail about designing a subscription integration, read this guide.
Updating your pricing models might necessitate raising prices for your goods and services for the following reasons:
- Cost of materials has increased since your last pricing exercise
- Cost of labour has increased (or needs to increase)
- Comparable offerings in the market are priced higher than yours
- You're restructuring your pricing model to emphasise certain subscription tiers, products or services to align with business goals
Strategically adjusting your pricing, when necessary, is part of any growth strategy. As you periodically review high-level business goals and decide where to focus your energy and resources, part of that exercise should include reviewing your prices and making thoughtful adjustments.
Facilitate and encourage movement to preferred pricing plans and tiers.
As you build out more dynamic pricing and billing options, give your customers the ability to easily switch between different tiers – especially when upgrading or switching from a tier you're trying to phase out. With Stripe, enabling these actions for your customers is possible through the customer portal. The customer portal allows your customers to manage their payment details, invoices and subscriptions in one place. You can also include links to the customer portal in upselling or cross-selling campaigns to facilitate more direct conversion to any new billing or subscription plans you offer.
Improve your dunning management.
Dunning is how you communicate with your customers to collect past-due balances before cancelling their accounts. How well or poorly your business approaches this task can greatly impact churn and MRR. Businesses that use Stripe Billing have access to dunning tools that have helped businesses recover 38% of failed recurring payments (on average). This includes Smart Retries, which typically recover 11% more revenue than retrying failed payments on a set schedule.
Refresh your product and subscription catalogue.
Revenue is greatly impacted by the way customers navigate and interact with your catalogue of subscription options. Your digital storefront should be clear and intuitive, with strategically constructed customer pathways that keep users and convert them. Examine your engagement metrics, and pinpoint moments when users tend to drop out of the conversion funnel. Where are you losing people? What does that tell you about what you can change on your website to increase conversion? Similarly, critically examine how less popular products or membership options are presented online. Is their lack of popularity a reflection of customer disinterest, or do you need to reconsider how you're positioning and marketing these underperformers?
Offer – and advertise – discounts.
Promotional pricing is a great way to boost sales, and it can be structured in a number of different ways. Understanding how sales increase or decrease at different times of the year can help you time discounts strategically. If you know what segments of your market are more likely to be interested in different products or services during certain times of the year – or even segment preferences in general – you can create targeted promotions to fill in sales gaps or double down on known areas of strength. Using Stripe Billing, you can apply discounts to the subscriptions you offer and use coupons to create promotion codes to share with your customers.
Create custom landing pages.
Content marketing is a powerful revenue driver for most businesses. Depending on your industry and key audience segments, some content formats will perform better than others. One perennial high performer for most businesses is custom landing pages that accentuate different value propositions for your goods or services. Creating unique landing pages that capture different traffic streams by highlighting key use cases or features comes with several benefits:
- You eliminate the pressure around what to feature on your website. Using multiple unique landing pages negates the difficult decision about which value propositions to prioritise in your web copy.
- You learn what features and messaging directions resonate most with different audiences. Custom landing pages, and the marketing and advertising assets that support them, will generate measurable performance metrics that give your team clear insights. Those insights will help you determine what messages and features compel audiences to act – and which ones don't.
Expand upmarket.
If your business caters to small businesses or individual consumers, and you're looking to increase your MRR, it's worth visualising what an offering for enterprise customers might look like. Even products and services that don't hold obvious upmarket viability might have more potential than you'd first assume. For example, if your primary product is a mental wellness app for individuals, it could be worth exploring a white-label version for enterprise customers to offer as an employee perk.
Upsell users who are on free plans.
Free subscription plans can be a highly effective way to attract new customers. No matter how you structure a free subscription or trial, you should regard it as an incentive that converts non-paying users into paid customers. If you're able to successfully generate conversions, then a free plan or trial is probably worth continuing. But if you discover you aren't converting a significant number of free subscribers or you're using up too many resources on your free plan, it might be more advantageous to drop it entirely and try another idea.
The way you structure your subscription tiers should directly align with an upselling-oriented strategy. What exactly does that look like? The features, perks and access available to customers in each tier should be portioned out to entice users to level up. Beyond thoughtfully tiered features, offering your customers add-ons, metered billing and per-seat or per-user billing means your revenue will grow organically as your customers' usage increases.
Track performance with detailed reporting – and act on what your analytics tell you.
The best subscription models are nuanced, flexible and accommodating – valuable and relevant to as much of your market as possible. But a best-laid subscription model often comes with increased complexity, so detailed performance tracking and reporting are critical to gaining actionable insights into what's working and what needs improvement.
One of the strongest tactics for increasing MRR is to monitor your performance according to comprehensive key metrics, regularly review the reports and ensure that the resulting insights are implemented. Stripe Billing offers ready-to-use analytics that track and report on everything from growth to subscriber numbers to retention and churn. With Sigma, Stripe businesses can create fully customised reports using information about payments, subscriptions, customers, payouts and more.
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