Are 90 day paid trials in enterprise SaaS counted as MRR or only after they commit to longer agreements?

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JASON LEMKIN

There’s no right answer because MRR isn’t a GAAP metric.

Having said that, almost all companies I work with include trials and pilots in MRR, but segment out their revenue into trial/pilots and longer term/committed contracts.

This is the best way to do it, usually IF your pilot/trial conversion rate is high. E.g., $100k in total MRR, $85k from committed contracts, $15k from pilots.

It’s also important to segment churn, if your pilots churn at a high rate.

If your pilots churn at a very high rate (>30–50%), then consider not including them in MRR. Since they aren’t recurring. Place them in a different revenue category altogether.

In the end, this problem usually solves itself as you get bigger. Once you have a brand, hit $10m+ ARR, you can switch these contracts to “opt out” instead of time-based pilots (in fact, try to do this now if you can — a year contract, with an opt-out clause at Day 90) … and then, get rid of most pilots altogether in many cases.

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Published on August 21, 2016
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