When Simple Becomes Tricky: Should Discounts Be Included in MRR? - Issue 285
So many ways to screw up your reporting.
Last week, I came across ChartMogul’s article Should discounts be included in MRR? expecting (once again) the usual how important MRR is, and how it should reflect the company’s actuals and all that.
Instead, the author, who happens to be ChartMogul’s Director of Sales, argued the opposite: don’t include discounts in MRR. It made me raise an eyebrow at first, because one of the first things you learn in analytics is to always include discounts (and refunds) in LTV, in revenue reporting (which, please don’t tell your CFO, is often just SUM(usd_values_received) in your dashboard), basically, in everything. Otherwise, you’ll over-report.
But analytics isn’t finance (though I wish it were). There are 20 ways to define revenue and even more ways to calculate ARR. And the author is right - we shouldn’t include discounts in MRR.
MRR is NOT the total sales collected in a month. That’s where most confusion starts, and one of the reasons semantic layers rarely work for everyone. The revenue metric you use to measure growth isn’t the same as the one finance uses to close the books.
To make things worse, many growth teams are still (badly) stuck measuring marketing and product initiatives against MRR, LTV, or ARPU. Apparently, measuring A/B tests by something simple, like net new paid customers or transactions, isn’t trendy anymore. It has to be a finance-driven, overly complex, cumulative number with at least 4-6 moving parts. Then, you know… it feels serious. 🤦♀️🫠
So today, let’s talk about:
Whether discounts should be included in MRR.
When they shouldn’t and why.
How to define revenue for your business.
Why using consolidated financial metrics (MRR, ARPU, LTV) for growth experiments is misleading.
And most importantly, how to make revenue metrics actually work for analytics.
Life is easier when you stay away from revenue reporting
If you think about it, analysts and data scientists work with transactions, subscriptions, customers, purchases, and funnel conversions. Very rarely with financial forecasts. Maybe the reason is that they tend to overcomplicate things, running regressions and building models, when all executives really want is a moving average or a historical growth rate. What I learned - executives don’t trust what they can’t replicate in their spreadsheet, especially when it comes to revenue reporting.
So, to begin with, we’re not the owners of revenue reporting. We don’t own billings, MRR, EBITDA, debt-to-sales ratio, or bookings. That’s accounting and finance territory, based on data derived directly from bank statements and payment processors. We don’t report revenue from Google Analytics, and we definitely don’t pull the cash balance from a BigQuery or Snowflake table with 14 upstream models. But we do report everything else, and somehow, we’re expected to make it align perfectly.
