You calculate it by normalising every recurring contract to a monthly figure and adding them up — an annual plan at $1,200 counts as $100 of MRR, not $1,200 in the month it was paid. One-off fees, setup charges and consulting projects are excluded, because the point of the metric is predictability, not cash collected. Most founders also break the movement down: new MRR, expansion from existing customers, contraction from downgrades, and churned MRR from cancellations.
MRR matters because it turns a business into something you can plan against. With $18,000 of MRR you know roughly what next month looks like before it starts, which is what makes hiring, spending and forecasting possible. The breakdown is where the real information sits: $2,000 of new MRR alongside $1,800 of churn is a business treading water, and the headline growth number alone will never tell you that.
A concrete example: you have 140 customers on a $60 monthly plan and 20 on an annual plan billed at $600. MRR is (140 × $60) + (20 × $50) = $9,400. In the month, you add 12 new customers ($720), five existing ones upgrade (+$300), two downgrade (-$120) and six cancel (-$360). Net movement is +$540 — real growth, but a third of your new revenue was consumed by customers leaving, which is the number worth acting on.