Reactivation MRR

What is reactivation MRR?

Reactive MRR is the revenue earned from reactivated subscriptions of clients who previously canceled their service relationship with the business.

The B2B terminology refers to the amount earned from the businesses that previously terminated their contract. It is one of the primary metrics used for the businesses that work on the subscription model. Additionally, it is advised to calculate the Reactivation MRR monthly to ensure long-term benefits and real-time tracking.

Though Reactivation MRR is not applicable in all business scenarios, it is widely used for calculating the effectiveness of a SaaS Business. It represents the returning customers that were previously considered dead due to the competition of a shift in preference. One important thing to remember while calculating the Reactivation MRR is that you should consider the clients who came back to continue the service and made payment for continuation after a period of dormancy.

As a B2B business, the main insights that you will gain by calculating the Reactivation MRR are as follows:

• Effect of the marketing campaigns.
• Your positioning against competitors is based on the customers returning to you.
• Change in the market capitalization over time in terms of increase in revenue.

Reactivation MRR formula

Calculating Reactivation MRR is very easy. The formula for calculating the same for a SaaS business is as follows:

Say, 7 subscription plans were canceled in January for $300. After a particular period, 6 of these clients registered back with your business.

Then, the Reactivation MRR is:
Reactivation MRR = 6*$300 = $1800.

To understand the right way to measure Reactivation MRR, there are a few things that a business should consider.

How to measure reactivation MRR

The main things that you should know while measuring the Reactivation MRR are as follows:

• Number of B2B clients returned to the business.
• Per head charges that the subscribers pay.

The steps that are required to be followed while calculating the Reactivation MRR are as follows:

Step 1: Generate the list of the clients registered on your SaaS platform.
Step 2: Mark those clients who have returned to your platform for the services and have paid the fees.
Step 3: Calculate the fees paid by these B2B clients.

The total amount of the revenue generated is your Reactivation MRR.

But there are a few things that should be avoided when calculating the Reactivation MRR for a SaaS Business:

• When calculating the Reactivation MRR, it is important to ensure that non-recurring revenues are not considered in calculating the total revenue.
• You should not consider one-time set-up fees or any such charges in the calculation.
• MRR is monthly return revenue. It’s important to ensure that the quarterly or annually paid fees are not added to the calculation without normalizing.
• Any trial or lead customer converted to a permanent customer should not be included in the calculation.
• If you offer any discount to the returning customer on your SaaS platform, the net value should only be considered.

Reactivation MRR example

Say a SaaS business named ABC Co. offers a CRM platform with a customization facility. At the start of the year, it has 1000 subscribers who pay $30 monthly for the service.

So, the total monthly revenue becomes $30,000.

After completing 4 months of service, 150 of your customers have stopped the subscription fee payment. The net customers now availing the services and paying fees is 850.

This makes your monthly revenue to be $25,500.

Upon analyzing this, you adopt revival strategies to reactivate the dormant clients. Following the plan, 50 of your old customers subscribed in September.

Now, let’s calculate the revenue and Reactivation MRR in September:

Revenue = Total number of customers * Subscription fees = 900 * 30 = $27000

From this, you can calculate the reactivation revenue of the customer returned to your platform.

Reactivation MRR = Sum of MRR from customers that previously churned = 50 * 30 = $1500

Since calculate on monthly basis, the reactivation MRR tends to change. This ratio helps you understand the quality of your service compared to your competitors based on the customers who returned and revived the plans. It also determines the effectiveness of the revival strategies adopted and effectiveness of SaaS product placement.