4. Initial MRR Analysis

 
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Overview

In this lesson, we’ll start analyzing Monthly Recurring Revenue (MRR), the key revenue measure for a SaaS company. We’ll analyze MRR development by location, and by the different plans offered.

Lesson Notes

Trends in Monthly Recurring Revenue

  • As MRR can be analyzed as a time series, we use several line charts to track its growth
  • Overall, MRR has increased significantly and steadily over the years 2016 and 2017
  • The largest growth by location has been in the USA, which has overtaken Great Britain to become the largest source of revenue
  • There are no sectors that have an obviously different growth rate to any of the other sectors
  • The Enterprise plan has seen a larger increase in MRR than any other plan and  has started to generate substantially more MRR than the Advanced plan

Transcript

In this lesson we'll start to look at monthly recurring revenue or MRR.

For a software as a service business such as Interslice, MRR is a critically important revenue figure.

As all of the plans sold by Interslice are sold as indefinite monthly subscriptions, MRR is actually the same as monthly payment amounts.

Our goal in this lesson is to create line charts that analyze MRR trends over time by location and plan.

We'll start with a chart looking at MRR by location. We'll create a line chart, put it on the left half of the canvas, and add both the MRR in the transaction date fields from the transactions table.

Next we'll select the branched arrows to drill down through the date hierarchy to the monthly level.

All transactions are processed on the first day of the month so there's no need to drill down any further.

At a glance it's clear that MRR has increased significantly over the last two years.

Let's analyze this trend in more detail by adding a legend.

We'll navigate to the customer's table and drag the location field to the legend well.

The chart now shows separate lines for each location.

MRR growth has clearly been driven by Great Britain and the United States.

Notice that the US is overtaking Great Britain in the course of the dataset.

We'll now create another chart to look at MRR changes by sector.

We'll make a copy of this chart with control c and paste it with control v.

We'll then position it on the right half of the canvas.

Next we'll remove location from the legend well and replace it with sector.

At first glance there did not appear to be any interesting patterns with all the sectors growing at similar rates.

It seems the company is growing broadly across all sectors and is not dependent on any particular area. As the MRR by sector chart is not particularly useful, let's change the legend.

We'll navigate to the plans table and drag the plan name field to the legend well.

The chart now shows us the trend in MRR for each of the plans offered by the company.

As we might expect the more expensive plans generate the largest amount of MRR.

This chart gives us good insight into the reason for the growth in MRR.

We can see that although all plans have increased their MRR by some amount, the enterprise plan has begun to generate levels of MRR that are well above the others.

Let's use these charts to filter each other.

We'll navigate to the legend of the MRR by location chart and select Ireland.

We can see that in Ireland MRR for the enterprise plan only overtook the advanced plan in July 2016.

The shift in both lines suggests that a large client upgraded from the advanced to enterprise plan.

If we select Great Britain, we can see that the advanced plan and the enterprise plan generate roughly the same MRR until May 2017.

At this point the advanced plan seems to have stalled.

This is an issue that management should investigate.

Finally, if we select the United States, we can see that MRR by plan seems to closely follow the overall trend with a substantial increase in MRR generated by the enterprise plan.

It's clear that the trends in MRR are not identical across all plans or locations in our dataset.

As we can see, we're able to derive some interesting insights.

In the next lesson we'll dig a little deeper and see how both new and returning customers as well as expanding and contracting customers are driving the increasing trend in MRR.