If you run a software business, ignoring your Monthly Recurring Revenue schedule (MRR) can cost you your next funding round - or a good exit 👇

If you run a software business, your MRR schedule isn’t just a report - it’s the heartbeat of your company.Investors love software businesses because they scale fast with very low marginal cost per new subscription. And recurring revenue? That’s GOLD. That’s why recurring revenue sits at the core of your business.😱

𝗪𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝗮𝗻 𝗠𝗥𝗥 𝘀𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗿𝗲𝘃𝗲𝗮𝗹 𝗮𝗯𝗼𝘂𝘁 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀?

An MRR schedule lists all active customer subscriptions. It may look like simple info at first, but it can tell you a lot:•  Do your customers love your product? If they stay longer, you’re building something valuable.• Are customers spending more over time? That’s a good sign - they’re growing with you.• Is recurring revenue growing or shrinking? If it’s slowly going down, it’s a sign to act ASAP before it gets worse.

⚠️ 𝗖𝗼𝗺𝗺𝗼𝗻 𝗺𝗶𝘀𝘁𝗮𝗸𝗲𝘀 𝘄𝗶𝘁𝗵 𝗠𝗥𝗥 𝘀𝗰𝗵𝗲𝗱𝘂𝗹𝗲

• The schedule does not match the accounting records. Revenue in the schedule is different than what you have in your profit and loss statement. Big issue. You might get into trouble when raising money, taking a loan or selling your business.

• One-off income is recorded as recurring income. There are two problems with this. Once investors find it out (THEY WILL), then the trust in your finance numbers is tanking. The second reason is that once-off income drops because it's temporary and you are included in recurring revenue, then your recurring revenue also decreases.  In this case, your numbers will show high churn, which is the biggest software nightmare for investors and founders.

🤔 𝗛𝗼𝘄 𝘀𝗵𝗼𝘂𝗹𝗱 𝘆𝗼𝘂 𝘀𝗽𝗹𝗶𝘁 𝗿𝗲𝗰𝘂𝗿𝗿𝗶𝗻𝗴 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝗶𝗻 𝘁𝗵𝗲 𝗽𝗿𝗼𝗳𝗶𝘁 𝗮𝗻𝗱 𝗹𝗼𝘀𝘀 𝘀𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁?

Always allocate separate subscription categories for new customers and recurring, for example:Revenue - Licence (Year 1) - this is the new revenue for the yearRevenue - Licence (Year 2+) - this is the recurring revenue for the yearYou need to have the revenue split like that because you want to work out how well your marketing is working. For example, you will select a period, check how much new revenue was generated, and compare it with the amount of sales and marketing spent.

If you split your revenue, then you make it possible to work out unit economics easily, like customer acquisition costs, CAC Payback, Magic Number, etc.Remember, the MRR schedule is the lifeblood of your software business. Do you need someone to audit your MRR schedule and the rest of your financials? If so, send a message :)