What counts as recurring revenue
Recurring revenue is income from a contract that is reasonably expected to repeat without further sales effort. A monthly SaaS subscription, an annual enterprise contract, and a yearly maintenance fee on a software licence all qualify. One-off onboarding fees, professional services, hardware sales, and usage-based overages do not — they show up in total revenue but never in MRR or ARR.
The grey area is consumption-based pricing (Snowflake, OpenAI API, Twilio). The 2026 consensus is to include the committed minimum spend in MRR and report variable consumption separately as 'committed MRR vs total MRR'. Investors increasingly ask for both.
Calculating MRR and ARR correctly
Take every active paying customer at the end of the month. For each, normalize their contract value to a monthly equivalent: a CHF 12,000/year contract becomes CHF 1,000 of MRR. Sum across all customers — that's your MRR. ARR is simply MRR × 12, no adjustments.
Discounts and promotional pricing belong in MRR at the actual billed amount, not the list price. A customer on a 50% first-year discount counts as half their list-price MRR until the discount expires, at which point you book the increase as Expansion MRR.
Annual contracts are the trickiest. Booking a CHF 60,000 annual contract as CHF 60,000 of new MRR in the signing month inflates growth and is the #1 reason European seed-stage MRR claims fall apart in DD. The right answer: it's CHF 5,000 of new MRR.
Net New MRR: the five movements
Every month, MRR changes due to five movements. New MRR is revenue from net-new logos. Expansion MRR is upsell from existing customers (upgrading plans, adding seats, enabling premium features). Reactivation MRR is from previously churned customers returning. Churn MRR is revenue lost from customers cancelling entirely. Contraction MRR is revenue lost from downgrades and seat reductions without full cancellation.
Net New MRR = New + Expansion + Reactivation − Churn − Contraction. This number, more than any other, is what investors watch month-to-month. A SaaS company can grow ARR by adding new logos faster than it loses old ones — but if Net New MRR turns negative, the business is shrinking and any further sales investment is destroying value.
European SaaS benchmarks for 2026
Top-quartile early-stage European SaaS in 2026 hits the following: 8–12% month-over-month growth at sub-CHF 1M ARR, 5–8% at CHF 1–10M ARR, and 3–5% at CHF 10M+ ARR. Net Revenue Retention should be 105–115% for SMB, 115–130% for mid-market, and 125%+ for enterprise. Gross margin sits at 75–85%.
CAC payback should be under 18 months for SMB and under 24 months for enterprise. Burn multiple (net burn ÷ Net New ARR) below 1.5 is excellent, below 1.0 is exceptional, above 3.0 means the business is buying growth inefficiently.
How investors translate ARR into valuation
European VC SaaS multiples in 2026: seed ARR multiples of 5–8× for sub-CHF 2M ARR with 40%+ growth, Series A multiples of 8–12× for CHF 2–10M ARR with 80%+ growth, and growth-stage multiples of 6–10× depending heavily on NRR and gross margin.
Public SaaS multiples in 2026 average around 6× forward ARR — well below the 12–15× of 2021. Private rounds price at a 20–40% premium to public comps because of illiquidity offset by growth premium. A CHF 5M ARR SaaS growing 100% with 120% NRR realistically prices at CHF 40–60M post-money in 2026.
Model your SaaS revenue
Use the MRR Calculator to project your monthly recurring revenue, simulate churn and expansion, and forecast ARR over 24 months.
Open the MRR calculator →Frequently asked questions
Should I report MRR in EUR, CHF or USD?+
In the reporting currency of your investors. European startups usually pick EUR or USD; Swiss-headquartered companies often dual-report CHF and USD. Convert at month-end spot rates, not transaction rates, to keep month-over-month comparable.
Does free-trial revenue count as MRR?+
No. MRR includes only paying subscribers. A 14-day free trial that auto-converts to a paid plan adds MRR on the conversion date, not the trial start.
How do I handle annual contracts paid upfront?+
Book 1/12 of the contract value as monthly MRR each month. The cash sits on the balance sheet as deferred revenue. Reporting the full annual amount as one-month MRR is the most common DD-killer for European seed SaaS.
What's the difference between ARR and revenue?+
ARR is a forward-looking annualized run-rate from current subscriptions. Revenue (GAAP) is what you actually earned in the period. A startup with CHF 1M ARR might only have CHF 600k of trailing-12-month revenue if it grew rapidly during the year.
Why do investors weight NRR so heavily?+
NRR above 100% means the existing customer base grows revenue without any new sales. NRR of 130% turns a flat logo count into 30% organic growth — that's why SaaS companies with high NRR command 2–3× the valuation multiple of low-NRR peers.
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