SaaS MRR Bridge and Retention Model
Turn subscription data into reconciled MRR and ARR bridges, customer and revenue retention, and a defined SaaS magic number.
Before & after
Same prompt, same agent — the only difference is the skill.
Calculating MRR accurately can be tricky. Here's what to include and watch for: - **Include**: all recurring subscription revenue, normalized to monthly - **Annual plans**: divide by 12 to get the monthly figure - **Exclude**: one-time fees, setup charges, usage overages that aren't recurring - **Account for**: discounts (use the actual amount paid) Common MRR mistakes include counting annual contracts at full value in one month, including one-time fees, and not accounting for discounts. For a full picture, break MRR into new, expansion, contraction, and churned. Do you have your subscription data available?
"Feels wrong" almost always means one of four specific errors is
inflating it. Here's the correct calculation and the traps, so you can
see which one you hit.
CORRECT MRR — normalize everything to one month
Monthly plans → face value
Annual plans → contract ÷ 12 (NOT counted in full the signup
month — this is the #1 inflation bug)
Discounts → actual paid, not list price
One-time fees → EXCLUDED (setup, onboarding, overages aren't
recurring)
Usage that varies → excluded unless it's a committed floor
THE FOUR THINGS THAT MAKE IT "FEEL WRONG"
1. Annual contracts booked at full value in the signup month. A $12K
annual deal is $1K MRR, not a $12K spike. This one inflation makes
MRR jump and then look like it "churned" the next month.
2. One-time setup fees counted as recurring. They're revenue, not MRR.
3. List price instead of paid price on discounted accounts.
4. Failed payments still counted. A card that's declining isn't MRR
until it clears.
THE MOVEMENTS — where the real story is
Your total MRR is less useful than its composition:
New MRR + from new customers
Expansion MRR + from upgrades / seats added
Contraction MRR − from downgrades
Churned MRR − from cancellations
─────────────────────────────────────
Net new MRR = the number that actually tells you if you're growing
From these:
Gross retention = (start − contraction − churn) ÷ start [≤100%]
Net retention = (start − contraction − churn + expansion) ÷ start
[can exceed 100% — the metric investors care about]
Magic number = net new ARR ÷ prior-quarter S&M spend
WHAT TO CHECK FIRST
Pull whether annual deals are booked at full value in month one. That's
the error that most often makes MRR "feel wrong" — it's simultaneously
too high at signup and creates phantom churn later.
Share the subscription data and I'll compute the real MRR plus the four
movements.About this skill
Your billing export says MRR grew, but the waterfall does not balance and two dashboards disagree on churn. This skill turns subscription records into a reconciled MRR model, with explicit treatment of annual plans, returning customers, discounts, and retention denominators.
What it does
- Normalizes recurring subscription charges into monthly amounts without mistaking annual invoices or cash receipts for MRR.
- Builds customer-level MRR bridges separating new business, expansion, contraction, churn, and reactivation.
- Calculates GRR, NRR, customer churn, and revenue churn from the correct opening customer base.
- Reconciles closing MRR to the source records and identifies duplicates, missing history, currency effects, and unexplained differences.
- Calculates the SaaS magic number using a stated revenue basis, quarterly periods, and the prior quarter's sales and marketing expense.
- Reviews existing metrics for flattering errors, including new customers in NRR and misleading annualization.
What you get
A calculation-ready metrics model with an MRR waterfall, ARR, retention and churn results, and a magic-number calculation when the inputs support it. Assumptions, missing inputs, and reconciliation differences remain visible so another analyst can reproduce the numbers.
Best for
SaaS founders, finance operators, and analysts turning billing exports into monthly reporting, board metrics, or an investor update.
SKILL.md preview
---
name: saas-mrr-bridge-and-retention-model
description: Build reconciled SaaS MRR and ARR bridges from subscription records, classify customer movements, calculate opening-cohort retention and churn, and compute a precisely defined magic number. Use when the user says "calculate MRR from this export", "build an ARR waterfall", "our churn numbers do not match", "why is NRR higher in this dashboard?", "my MRR bridge keeps failing to balance", "calculate our SaaS magic number", or "check these board metrics".
---
# SaaS MRR Bridge and Retention Model
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