How should discounts be treated in MRR?

A SaaS founder recently asked me a question that sounds simple – but isn't:

"If I give a one-time discount on an annual plan, should it still count toward MRR?"

It's one of those moments where accounting meets strategy. Discounts feel like a small thing – a 10% promo code, a month free, or a temporary deal to close a customer – but they actually affect both how your MRR is calculated and how predictable your revenue really is.

Discounts and MRR – how they interact

In classic SaaS accounting, Monthly Recurring Revenue (MRR) is based on the normalized monthly value of active subscriptions after all recurring discounts.

That means:

• If a customer pays $90/month on a $100 plan with a permanent 10% discount, their MRR is $90.
• If they get a one-time $100 discount on an annual plan, the MRR shouldn't permanently reflect that. Instead, the effective MRR is lower for the discounted month, then returns to normal after the discount period ends.

In other words:

Only recurring discounts should affect MRR. One-time discounts affect recognized revenue, but not long-term MRR.

Let's take a simple example.

Example: Annual plan with one-time discount

A customer signs up for a $1,200/year plan (normally $100/month), but you give them $200 off to close the deal – so they pay $1,000 upfront.

In MRR terms:

• Normalized MRR = $1,200 / 12 = $100
• Discounted MRR (for that billing period) = $1,000 / 12 = $83.33

But only for that period. Once the discount period is over, MRR should revert to the full $100/month. So in practice, the discount temporarily reduces MRR for the first month, but it's not a permanent contraction.

If you're tracking CMRR (Committed MRR), it's useful to separate this out:

• Current MRR: $83.33
• Committed MRR (next renewal): $100

That's exactly how we're handling it in GrowPanel's CMRR model – it shows planned churn, upgrades, downgrades, and discount expirations so you can see what's coming in the next months.

Types of discounts and how they affect MRR

Not all discounts are equal. Here's how they're typically treated in SaaS metrics:

The key idea is timing: A discount might temporarily reduce your MRR, but your CMRR should reflect the committed, post-discount revenue – giving you a forward-looking picture.

Pros and cons of using discounts

Discounts are powerful tools. Used right, they can accelerate deals and win back customers. Used poorly, they can erode trust and hurt your metrics.

✅ Pros

• Reduces friction at purchase: Helps customers commit faster, especially for annual plans.
• Win-back leverage: A discount can re-activate churned users or those about to cancel.
• Strategic flexibility: Lets you test new price points or plans without permanent changes.
• Predictable expansion: When time-limited, discounts create automatic upgrades later (visible in CMRR).

❌ Cons

• MRR volatility: One-time discounts can make short-term MRR appear weaker.
• Value perception risk: If used too often, discounts train customers to wait for deals.
• Complex analytics: Makes cohort and ARPA calculations noisier unless tracked clearly.
• Lower LTV: Permanent discounts reduce long-term customer value, even if churn remains stable.

When and how to use discounts

There's no universal rule, but the best SaaS companies treat discounts as a strategic instrument, not a default sales tactic.

1. New customer acquisition

Offering a small incentive (e.g., one month free on an annual plan) can push hesitant prospects over the line – especially in competitive markets. But don't hide your pricing: transparency builds trust.

2. Pre-cancellation offers

Triggered discounts just before cancellation can save accounts, but should be used sparingly. They work best if they come with a message like:

"We'd love to keep you – here's 30% off for 3 months while you settle things."

Automate this through your cancellation flow or CRM.

3. Win-back campaigns

For churned users, a personalized reactivation offer is often more effective than generic email marketing. A "come back and get 50% off your first month" campaign works particularly well within 60 days of churn.

4. Drip campaigns

Discounts shouldn't lead your email nurture sequence, but they can appear as a final nudge after several value-focused touchpoints. For example:

• Email 1–2: Product value and ROI
• Email 3–4: Customer stories or case studies
• Email 5: Discount offer to drive conversion

The best SaaS sales teams use this structure intentionally – not reactively.

How GrowPanel models discounts in CMRR

In GrowPanel, we're building Committed MRR (CMRR) as an evolution of standard MRR. It reflects what's already committed for future months – factoring in:

• Planned churn
• Planned upgrades or downgrades
• Expiring discounts

That last one matters. A customer paying $50/month now due to a temporary 50% discount on a $100 plan will automatically expand to $100/month when the discount ends. CMRR will show this as planned expansion, giving you a clear forecast of true growth momentum.

This helps you separate real contraction from temporary discounting, which is often the difference between panic and insight.

Good practices for discount tracking

• Tag every discount with type and duration in your billing system (Stripe, Paddle, etc.).
• Separate permanent vs. temporary discounts in your analytics.
• Track discount expirations to project automatic expansions.
• Avoid over-discounting; it can distort your CAC/LTV ratio and perceived value.
• Show CMRR alongside MRR to visualize upcoming revenue normalization.

Closing thoughts

Discounts aren't bad – they're just misunderstood. In SaaS, they can either distort your MRR or, if modeled correctly, make your forecasts smarter.

The key is separation:

• MRR shows your current normalized recurring revenue.
• CMRR shows where you're heading – factoring in expiring discounts, planned churn, and upgrades.

Handled well, discounts can drive growth without hiding the truth in your metrics. Handled poorly, they make your dashboards look healthy while masking the fragility underneath.

At GrowPanel, we think clarity beats complexity. Whether it's usage-based billing, prepaid deals, or discount campaigns, what matters is that your data reflects reality – not just the invoice total.

Discounts may reduce MRR today. But if they're part of a healthy, time-bound strategy, they can strengthen your CMRR – and your confidence in tomorrow's revenue.