Direct answer

SaaS revenue forecast: MRR, growth, and churn

Start with opening MRR, add new-customer MRR and expansion, then subtract churn and contraction to reach ending MRR. With limited data, start with customer count times average monthly revenue, while keeping pricing, acquisition, and retention separate.

  • Set a baseline month for MRR
  • Separate new, expansion, contraction, and churn
  • Use one consistent MRR definition for ARR
  • Connect billing terms to cash flow

01Review area

Build the MRR bridge

  1. 01

    Define opening MRR

    Exclude one-time services, hardware, and contracts that have not started. Record the month and currency.

  2. 02

    Separate new and existing-customer movements

    New customers, upgrades, downgrades, and churn reflect different operating questions and should not disappear inside one growth rate.

02Review area

Connect operating drivers

  1. 03

    Validate MRR with customers and price

    Compare customer count times average monthly revenue with MRR and explain differences caused by plan mix or discounts.

  2. 04

    Connect acquisition to sales capacity

    New-customer assumptions should trace to traffic, conversion, sales headcount, sales cycle, or channel capacity.

03Review area

Review cash and scenarios

  1. 05

    Do not treat ARR as cash

    Annual contracts may bill monthly, quarterly, or annually. Schedule cash using actual payment terms.

  2. 06

    Test churn and growth sensitivity

    Compare slower acquisition, higher churn, and pricing changes, then measure revenue, gross margin, runway, and hiring impact.

What Tessly can help with

Keep assumptions, calculations, and decisions in one model

Tessly organizes MRR, pricing, customer, and growth assumptions and connects the revenue path to cost, cash, and scenarios.

Tessly does not prove product-market fit or guarantee customer growth and retention assumptions.

Build a forecast

FAQ

Frequently asked questions

How do MRR and ARR relate?

A common simplification is ARR equals MRR times 12, provided MRR is defined consistently and excludes one-time revenue.

Can a pre-revenue startup enter zero MRR?

Yes. An explicit zero means there is no current MRR. Build future scenarios from launch timing, price, and customer acquisition.

Should churn use customers or revenue?

They answer different questions. Logo churn measures customer loss; revenue churn measures lost revenue. Expansion businesses may also track net revenue retention.

Is an annual contract recognized upfront?

Separate revenue recognition from cash collection. Recognition follows the service period, while cash follows billing terms.

Next step

Put this question back into the full financial model

Continue with the runway and burn rate guide or the 12-question fundraising checklist.

Organize your modelAll guides