Max MRR: Why Your Growth Will Stop (And How to Fix It)
Startups promise exponential upside, but most hit a wall they never saw coming.
We obsess over New MRR; closing deals, launching features, and driving traffic. But there is a hidden metric that mathematically determines exactly when your growth will flatline.
It’s called Max MRR.
Understanding it is a survival skill. It reveals your startup’s "Growth Ceiling", which is the maximum monthly revenue you can reach based on your current churn, no matter how hard you sell.
The Basics
Every subscription business fights two opposing forces:
- New MRR (Linear): The fresh revenue you add each month. This usually grows steadily.
- Churn (Exponential): The percentage of revenue you lose each month. As your revenue grows, the dollar amount of churn grows with it.
Eventually, the dollars you lose from churn will exactly equal the new dollars you bring in. That is your Max MRR. Once you hit it, your growth stops dead.
The Formula
The math is simple:
$$\text{Max MRR} = \frac{\text{New MRR}}{\text{Churn Rate %}}$$
Example: The Churn Trap
Let’s say you are adding $5,000 in new MRR every month. That feels like decent growth. But you also have a 5% monthly churn rate.
- Year 1: You grow fast because your total revenue is low, so 5% churn is a small number.
- Year 3: You hit $100,000 MRR. Now, 5% churn means you are losing $5,000 every month.
- The Result: You are bringing in +$5k and losing -$5k. Your net growth is 0.
You have hit your ceiling. You will never grow past $100k unless you fundamentally change your business metrics.
Why This Matters
Max MRR is a leading indicator. Revenue is a lagging indicator.
By the time your revenue flattens, it’s often too late to fix the underlying issues quickly. This tool lets you peek into the future and see your ceiling today.
The Good News: You can move the ceiling.
If you reduce your churn from 5% to 2.5%, you instantly double your Max MRR potential. This proves that for long-term scale, retention is the only growth lever that matters.
Based on the Max MRR concept by Jason Cohen at A Smart Bear.
