Monthly recurring revenue is the predictable revenue your business generates monthly. I consider it ‘predictable’ because it is consistent, recurring payments from the customers based on their active subscriptions.
Monthly recurring revenue is highly predictable when used simultaneously with a consistent billing cycle and a clear understanding of customer behavior. A consistent monthly recurring revenue can help you identify your business growth trajectory.
In this blog, we’ll explore all the aspects of Monthly Recurring Revenue, and how water delivery software can help you improve it.
What is monthly recurring revenue?
Monthly recurring revenue or MRR, is a key performance indicator metric that enables you to measure the predictable and recurring revenue you can expect to generate each month from your subscription-based water delivery business. MRR considers recurring charges like discounts, coupons, and add-ons but excludes one-time charges.
How do you measure monthly recurring revenue?
Calculating your monthly recurring revenue is very simple. You can multiply the active monthly subscribers by the average revenue per user (ARPU).
MRR = Number of active monthly subscribers*ARPU
If you have 100 bottled water monthly subscribers, the average revenue you generate from each subscriber is $50. Then your monthly recurring revenue will be 100*50= $500
Types of monthly recurring revenue (MRR)
- New MRR – Monthly recurring revenue generated from the new customers in a month.
- Churned MRR – Revenue lost due to customers canceling or downgrading their subscriptions.
- Expansion MRR – Revenue gained from existing customers through upgrades, add-ons, or cross-selling.
- Net New MRR – It is calculated by adding New MRR with Expansion MRR and then subtracting it with Churned MRR. Net New MRR = New MRR +
- Expansion MRR – Churned MRR
Importance of calculating monthly recurring revenue
Knowing your MRR is helpful in several ways, especially for subscription-based businesses like your water delivery business. Calculating your monthly recurring revenue allows you to assess the financial health of your business. Some of the reasons for knowing your MRR are:
- Revenue predictability and stability – You can get a clear picture of your predictable revenue, which allows you to predict future income. This assists you in planning your finances and budgeting and enables you to make informed investment decisions.
- Tracking growth over time – MRR is a key performance indicator that can help you assess business growth. You can determine your customer acquisition rate, retention rate, and increased customer value through upsells or expansions.
- Customer churn and retention – Calculating MRR can help you understand customer churn and retention. Monitoring churned MRR can help you identify customer behavioral patterns in cancellations, allowing you to make plans to improve retention strategies.
- Efficiency of sales and marketing – You can track the impact of sales and marketing on the MRR, which helps you evaluate the effectiveness of customer acquisition strategies.
- Understanding customer value – You can understand the value you generate from each customer regularly. This helps you get insights into the value generated based on customer segments, helping you customize your service and marketing efforts accordingly.
How can you improve your Monthly Recurring Revenue?
Improving your Monthly Recurring Revenue requires strategic planning and consistent improvements. You need an efficient system that can streamline your business and allow you to monitor and track your business operations. Analyzing the operations and planning accordingly can help you improve your MRR.
You can implement technologies that enable you to track and monitor your business. Water Delivery Solutions is an advanced technology that can automate your operations and track and monitor your business. It has intelligence software integrated that auto-generates various reports and analytics, including the MRR you generate. Next, we’ll see how Water Delivery Solution can help you improve MRR.
What is Water Delivery Solutions?
Water Delivery Solutions is a water delivery management software. It is a SaaS-based software that works on subscription-based scheduled deliveries. The software automates bottled water delivery operations, including ordering, invoicing and billing, stock management, delivery planning and route optimization, and data analytics. It aims to optimize and streamline these operations to improve efficiency and profitability and reduce costs.
The water delivery software includes three components that work together in sync to provide you with real-time tracking of the product, delivery, and finances. These three components include;
- Admin panel
- Customer app
- Water delivery driver app
What are the features of water delivery solutions that help in improving MRR?
The Water Delivery Solutions implements various features to enhance customer experience, increase retention rates, and drive additional sales that improve Monthly Recurring Revenue. The features of Water Delivery Solutions that help improve the MRR:
Subscription plans
You can offer multiple subscription plans with varying service levels, like different delivery frequencies (daily, alternate-day, custom-day, fortnightly), product quantity, and number of deliveries. The system allows you to offer percentage discounts on predefined numbers of deliveries.
Automatic billing and invoicing
Automation in recurring billing reduces friction, ensuring timely payment and improving positive cash flow and fewer cancellations. The system provides payment options, including payment gateways like PayPal, Stripe, and Gpay, payment cards (debit/credit), digital wallets, and direct debits, improving customer convenience. Customers can also make their payments in cash.
Easy subscription modification
The software allows your customers to edit their subscriptions. They can add or remove a water product, change the quantity of the water bottles, or delete their subscriptions easily. Customers can pause deliveries when they do not need the water and resume them when required. The skipped number of deliveries gets automatically added to the subscription plan.
Loyalty and referral programs
You can implement loyalty programs that reward customers for long-term subscriptions or frequent ordering. This can help you improve customer retention. The loyalty programs also incentivize existing customers, which improves customer satisfaction rates. Satisfied customers bring in new customers, increasing your customer base and boosting MRR.
Hassle-free delivery management
Water delivery management software offers delivery features like real-time tracking, timely delivery notifications, and the option to reschedule deliveries. These features can enhance the customer experience and increase retention rates. Offering consistent recurring deliveries based on customer preferences ensures consistent revenue.
Customer water delivery app
The water delivery app for customers is one of the components of the water delivery management system. This customer application works in sync to provide real-time updates to the customers and the admin about orders, deliveries, and payments. A mobile app allows customers to manage their subscriptions, view order history, and adjust subscription plans.
How does a high MRR help your business grow?
A high Monthly Recurring Revenue indicates a stable and consistent cash flow. A consistent and predictable revenue stream is crucial for driving business growth. Ways in which high Monthly Recurring Revenue can help your business grow:
Stable and predictable revenue
MRR is the average revenue generated from active subscribers in a month. Measuring MRR allows you to plan finances, create budget plans, and predict future revenue. You can make rational decisions based on data about future investments, expansions, and operations needs.
High customer retention rates
Higher MRR indicated strong customer retention and long-term customer relationships. Retained customers typically have high lifetime values, provide recurring revenue, and are likely to refer others. This creates a compounding effect to drive growth and acquire new customers without spending much on marketing.
Better cash flow management
Consistent and high MRR can easily cover operational costs, pay suppliers or water treatment plant maintenance, and meet payroll expectations. A constant cash flow gives financial security, which allows you to invest your profits into the business and accelerate growth.
Easy scalability and expansion
Consistent revenue gives you new business opportunities to explore new product add-ons, launch new products, or expand deliverable areas. The more stable and reliable MRR, the easier it is to scale operations without financial strains.
Attract more investors
The investors and stakeholders refer to your MRR as your business’s health index, stability, and growth potential. A high and stable MRR attracts new investors, opening up opportunities for funds and partnerships.
Conclusion
Improved Monthly Recurring Revenue is crucial for sustainable growth. You can opt for water delivery app development, which offers powerful features to streamline your water delivery operations and enhance customer satisfaction and retention rates. Book a free demo to see how ‘Water Delivery Solutions’ can ensure stable and consistent cash flow.
He loves to explore. His passion for helping delivery industries in all aspects flows through in the vision he has. In addition to providing smart solution to make delivery process flawless, Ravi also likes to write sometimes to make it easier for people from business industry looking for digital solutions.
