Recurring revenue is income that repeats on a predictable schedule, usually from subscriptions or service contracts. It is reported monthly as MRR (monthly recurring revenue) or yearly as ARR (annual recurring revenue). One-time sales, setup fees, and single consulting projects do not count, because they do not repeat on their own.
Investors value recurring revenue higher than one-time revenue because it is easier to predict. A generated business plan for a subscription business reports MRR in the financial section instead of one lump revenue figure.
Calculate MRR as the sum of what all active customers pay per month. An example: 340 customers on a €29 plan and 45 customers on a €99 plan. That is €9,860 plus €4,455, so MRR is €14,315. ARR is €14,315 times 12, which is €171,780.
Annual contracts need normalising. A customer who pays €960 once for twelve months adds €80 to MRR, not €960. Otherwise your chart shows a spike in January and a collapse in February that has nothing to do with your business.
Two more mistakes. First, founders count signups instead of paying customers. A free trial is not MRR until money moves. Second, they mix one-time revenue into the number. A €5,000 onboarding fee is real revenue, but putting it into MRR overstates your ARR by €60,000.
Track net new MRR each month: new customers plus upgrades, minus downgrades, minus cancellations. That single line shows whether the business grows under the surface. Total MRR can rise while the trend is bad, if a few large signups hide many small cancellations.
