Red flag explained · Numbers that disagree
Stated MRR above last month's collected revenue
Short answer: MRR is what subscriptions are worth on paper. Collected revenue is what arrived. When MRR is more than 15% above last month's revenue, failed payments, discounts or refunds may sit in between. Ask the seller to reconcile MRR to cash collected before you pay a multiple of MRR.
When the checker raises it
Raised as medium severity when stated MRR is more than 1.15 times last month's revenue.
Why it matters
Subscription dashboards often count a subscriber as MRR until they cancel, even if the card has failed twice. Discounts and coupons can also be left out of the headline figure.
What you buy is the cash. A business with $4,000 of MRR and $3,300 collected is a $3,300 business until the gap is explained.
A worked example
Composite example, not a real listing
Asking price: $80,000
MRR: $4,000
Last month revenue: $3,300
Average monthly profit: $2,900
Revenue verified via Stripe
Churn: 3% monthly
Business age: 3 years
Owner hours: 5 hours per week
Traffic or revenue sources typed in: Organic search 30%, Direct 40%, Referral 30%.
What the red-flag checker returns: payback of 27.6 months on average monthly profit, and this flag:
Medium Stated MRR is above last month's revenue
MRR $4,000 against $3,300 collected last month. Failed payments, discounts or refunds may sit in between.
Ask: Can you reconcile MRR to cash collected (failed payments, discounts, refunds, annual plans)?
The same example also raises: Concentration not disclosed.
What to check
- Ask the seller to reconcile MRR to cash collected: failed payments, discounts, refunds and annual plans.
- Ask for the payment processor's monthly payout report for six months.
- Ask how many subscriptions are past due today.
Questions to send the seller
- Can you reconcile MRR to cash collected (failed payments, discounts, refunds, annual plans)?
- Are the revenue figures before or after refunds, chargebacks and platform fees?
- Is the P&L on a cash or accrual basis, and how are annual plans and prepayments counted?
- Are there debts, unpaid invoices, or prepaid customer obligations that come with the business?
Related flags
Useful next
- Buying a micro-SaaS
- Free red-flag checker: paste a listing and see which flags it raises.
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The checker is a set of plain rules, not an AI model, and its flags are prompts for questions, not verdicts. Composite examples are invented. Informational screening only, not investment, legal or tax advice.