What is Expansion MRR?

Expansion MRR is the monthly recurring revenue added in a period by customers you already have, through upgrades, extra seats, add-ons or a second product, counted separately from revenue from newly signed customers.

At a glance

• It’s one of the five MRR movements ChartMogul tracks: new business, expansion, reactivation, contraction and churned MRR.
• Formula: the sum of MRR increases on existing accounts in the period.
• Expansion MRR rate: expansion MRR ÷ MRR at the start of the period.
• When expansion and reactivation outweigh churn and contraction, you have negative net churn, the same thing as NRR above 100%.
• It’s the monthly, MRR-based slice of the broader idea of expansion revenue.

How to calculate expansion MRR

Add up every increase in recurring revenue from accounts that were already paying at the start of the month. A seat added, a move to a higher tier and a new add-on all count. A customer who comes back after cancelling is reactivation, not expansion, and a downgrade goes into contraction.

Example (illustrative): you start the month at $200,000 MRR. Twelve existing accounts add seats or upgrade, adding $9,000. Expansion MRR is $9,000 and the expansion rate is $9,000 ÷ $200,000, or 4.5%. If you also lost $5,000 to churn and $1,000 to downgrades, net MRR churn is ($5,000 + $1,000 − $9,000) ÷ $200,000, or −1.5%. That’s negative churn.

Expansion MRR and negative churn benchmarks

ChartMogul’s data shows negative churn gets more common as companies grow. In its analysis, 9% of companies under $300K ARR had net negative churn, rising to 19% at $1M to $3M, 26% at $8M to $15M and 40% at $15M to $30M.

ChartMogul’s advice on getting there is mostly about pricing: tiers that grow with the customer’s seats, usage or size give expansion somewhere to come from. A flat price per account caps expansion MRR at whatever add-ons you sell.

Common expansion MRR mistakes

• Mixing reactivations in. A returning customer is a win, but counting it as expansion makes your existing base look stronger than it is.
• Netting it against contraction. Report expansion and contraction as two numbers. A flat net figure can hide a lot of both.
• Reading it without logo churn. ChartMogul points out that negative revenue churn can sit alongside rising customer churn. You can grow revenue from the customers who stay while still losing accounts.
• Counting one-off fees. Setup, training and services fees aren’t recurring. Leave them out of MRR entirely.
• Leaving it to chance. Expansion that only happens when a customer asks isn’t a motion yet. Someone has to watch usage and raise it.

How expansion MRR shows up in a revenue system

Expansion depends on post-sale work as much as on pricing: onboarding that gets usage up, and someone who notices when an account is ready for more. At Datatruck, the engagement grew from outbound into a self-serve signup channel and then a post-sale team. Read how Datatruck’s post-sale team runs.

Terms that sit next to expansion MRR

Expansion MRR is one movement inside MRR, and its opposite is churned MRR. Together they decide net revenue retention, while gross revenue retention leaves expansion out. A land and expand strategy is built to grow it, and higher expansion lifts customer lifetime value.