Monthly Recurring Revenue (MRR) is perhaps the most-referenced startup metric, but MRR is only applicable to companies that provide services to their customers through an ongoing contractual relationship, e.g., SaaS businesses (For more on MRR, read my previous post: MRR – The Definition and Formula for Monthly Recurring Revenue).
So what is the equivalent metric for non-subscription-based, non-SaaS companies?
The closest equivalent is Repurchase Rate. Like MRR, Repurchase Rate is a metric used to understand customer loyalty and the amount of revenue that can reasonably be expected from an ongoing customer relationship. Specifically, this metric is a calculation of the rate at which customers make repeat purchases. It is most commonly used in businesses that do not have a subscription-based business model, such as e-commerce and consumer product companies.
Repurchase Rate Formula
Repurchase Rate is calculated in two different ways.
If the customers who made multiple purchases within a period are only counted once, the repurchase rate is calculated by dividing the number of customers who made at least two purchases within a period by the total number of customers within that same period.
EXAMPLE: Company X has 300 customers over the course of a quarter and 30 of them made at least two purchases within that quarter.
30/300 = 10% Quarterly Repurchase Rate
If, however, the number of times a customer makes a purchase is considered, it should be calculated differently.
EXAMPLE: Company X has 300 customers over the course of a quarter. 270 customers made one purchase (no repeat purchase), 15 customers made two purchases (one repeat purchase), 10 customers made three purchases (two repeat purchases) and five customers made four purchases (three repeat purchases). The Repurchase Rate should be calculated as follows:
(15*2+10*3+5*4)/300 = 27% Quarterly Repurchase Rate
The first example seems to be the most commonly used calculation. If you are reporting this metric for MergeLane purposes (e.g., a MergeLane portfolio company completing our quarterly survey), please use the first method.