MRR in Ramp Interval Metrics - Example
This example illustrates the calculation of Monthly Recurring Revenue (MRR) for a subscription with a 3-year term and multiple Ramp Intervals, including regular and discount charges.
See the following example.
Example subscription:
Suppose your customer has a 3-year termed subscription from 2021/01/01 to 2023/12/31. A Ramp with three Ramp Intervals is configured for this subscription with each year being a Ramp Interval. The subscription is created by Order 1 with two regular charges and one discount charge as below:
-
Charge 1: a monthly recurring regular charge of the Flat Fee charge model, $5/month from 2021/01/01 to 2021/10/31, $10/month from 2021/11/01 to 2023/12/31.
-
Charge 2: a quarterly recurring regular charge of the Flat Fee charge model, $75/quarter for the entire term.
-
Charge 3: a recurring discount percentage charge, 10%, from 2022/07/01 to 2023/06/30. This discount charge is configured to be applicable only to Charge 1.
Both charge 1 and charge 2 are associated with the Ramp. Then the subscription is amended by Order 2 with the price of Charge 1 updated to $20/month from 2023/01/01 to the term end date. This subscription now has two versions. Version 1 is created by Order 1 and Version 2 is created by Order 2.
The following example shows the MRR metrics calculation for Subscription Version 1 created by Order 1.
Step 1 - For each charge in the subscription, calculate the MRR for each charge period during which the charge's net pricing remains constant.
In Subscription Version 1, the MRR values of Charge 1 and Charge 2 are illustrated in the following diagram. See Monthly Recurring Revenue for more information about how MRR is calculated for a charge.
Step 2 - Map the MRR of each charge segment (or charge period) to a specific Ramp Interval, as in the table below. Each row in the table represents a charge segment or charge period.
|
Interval |
Charge |
Start Date |
End Date |
Gross MRR |
Discount MRR |
Net MRR |
|---|---|---|---|---|---|---|
|
Interval 1 |
Charge 1 |
2021/1/1 |
2021/10/31 |
5 |
0 |
5 |
|
This charge period spans over Interval 1 and Interval 2. |
Charge 1 |
2021/11/1 |
2022/6/30 |
10 |
0 |
10 |
|
This charge period spans over Interval 2 and Interval 3. |
Charge 1 |
2022/7/1 |
2023/6/30 |
10 |
-1 |
9 |
|
Interval 3 |
Charge 1 |
2023/7/1 |
2023/12/31 |
10 |
0 |
10 |
|
This charge period spans over Interval 1, Interval 2, and Interval 3. |
Charge 2 |
2021/1/1 |
2023/12/31 |
25 |
0 |
25 |
Step 3 - For those charge periods that span over multiple Ramp Intervals, split them into sub periods, and then map the sub periods into the corresponding Ramp Intervals. In this example, Charge 1 has the charge period from 2021/11/1 to 2022/6/30 and the charge period from 2022/7/1 to 2023/6/30 to split. Charge 2 has the charge period from 2021/1/1 to 2023/12/31 to split. See the table below.
|
Interval |
Charge |
Start Date |
End Date |
Gross MRR |
Discount MRR |
Net MRR |
|---|---|---|---|---|---|---|
|
Interval 1 |
Charge 1 |
2021/1/1 |
2021/10/31 |
5 |
0 |
5 |
|
Interval 1 |
Charge 1 |
2021/11/1 |
2021/12/31 |
10 |
0 |
10 |
|
Interval 2 |
Charge 1 |
2022/1/1 |
2022/6/30 |
10 |
0 |
10 |
|
Interval 2 |
Charge 1 |
2022/7/1 |
2022/12/31 |
10 |
-1 |
9 |
|
Interval 3 |
Charge 1 |
2023/1/1 |
2023/6/30 |
10 |
-1 |
9 |
|
Interval 3 |
Charge 1 |
2023/7/1 |
2023/12/31 |
10 |
0 |
10 |
|
Interval 1 |
Charge 2 |
2021/1/1 |
2021/12/31 |
25 |
0 |
25 |
|
Interval 2 |
Charge 2 |
2022/1/1 |
2022/12/31 |
25 |
0 |
25 |
|
Interval 3 |
Charge 2 |
2023/1/1 |
2023/12/31 |
25 |
0 |
25 |
The final result for the MRR in the Ramp Interval Metrics level for Interval 1, Interval 2, and Interval 3 in Order 1 for Subscription Version 1 is shown in the table below:
|
Order |
Interval |
Charge |
Start Date |
End Date |
Gross MRR |
Discount MRR |
Net MRR |
|---|---|---|---|---|---|---|---|
|
Order 1 |
Interval 1 |
Charge 1 |
2021/1/1 |
2021/10/31 |
5 |
0 |
5 |
|
Charge 1 |
2021/11/1 |
2021/12/31 |
10 |
0 |
10 | ||
|
Charge 2 |
2021/1/1 |
2021/12/31 |
25 |
0 |
25 | ||
|
Interval 2 |
Charge 1 |
2022/1/1 |
2022/6/30 |
10 |
0 |
10 | |
|
Charge 1 |
2022/7/1 |
2022/12/31 |
10 |
-1 |
9 | ||
|
Charge 2 |
2022/1/1 |
2022/12/31 |
25 |
0 |
25 | ||
|
Interval 3 |
Charge 1 |
2023/1/1 |
2023/6/30 |
10 |
-1 |
9 | |
|
Charge 1 |
2023/7/1 |
2023/12/31 |
10 |
0 |
10 | ||
|
Charge 2 |
2023/1/1 |
2023/12/31 |
25 |
0 |
25 |