Expansion MRR measures organic growth inside your existing base
Expansion MRR is the MRR your current customers add to their contracts, and it is structurally different from new logo revenue in cost, predictability, and speed. Isolating it from new logo MRR lets you evaluate whether your existing base is growing or stagnating independent of new sales motion. Formula:| Component | Definition |
|---|---|
| Existing customer | Any account active at the start of the measurement month |
| MRR increase per customer | This month's MRR minus last month's MRR for that account |
| Expansion MRR | Sum of all positive MRR changes across existing customers |
Breaking down sources of expansion MRR
Expansion MRR can come from multiple motions within the same account, and tracking source is useful for attributing expansion to product, sales, or customer success activity.
| Source | Description |
|---|---|
| Seat/user expansion | Customer adds seats or licenses under an existing plan |
| Tier upgrade | Customer moves to a higher-priced plan tier |
| Add-on purchase | Customer buys a module, feature set, or integration not in the base plan |
| Cross-sell | Customer purchases a separate product line or SKU |
Why expansion MRR must be isolated from new logo MRR
Blending expansion and new logo MRR inside a single "new MRR" figure creates two problems. First, you cannot calculate the MRR waterfall accurately, which requires four distinct buckets: new, expansion, contraction, and churn. Second, you cannot measure the efficiency of your expansion motion separately from your acquisition motion, which distorts CAC and payback analysis.
A company that appears to be growing net new MRR aggressively may be masking flat or declining new logo acquisition with strong expansion from a maturing book of business. The reverse is also possible: robust new logo growth can obscure an eroding base.
Connecting expansion MRR to growth planning
Expansion MRR feeds directly into the MRR waterfall model, which is the standard framework for reconciling opening and closing MRR each month. It also contributes to net new ARR when annualized, and to net revenue retention as the offset against churn and contraction. For teams tracking expansion revenue at the ARR level, expansion MRR multiplied by twelve provides the annualized contribution from the existing base.
Frequently Asked Questions
What is the formula for expansion MRR?
Expansion MRR equals the sum of MRR increases from all existing customers in the measurement period, counting only customers who were active at the start of the period. Customers acquired and expanded in the same month are counted as new logo MRR, not expansion MRR.
What counts as expansion MRR?
Seat additions, tier upgrades, add-on purchases, and cross-sells to existing accounts all count as expansion MRR. Reactivation of a churned account typically counts as new logo MRR, not expansion, because the customer was not active at the period start.
How does expansion MRR relate to net revenue retention?
Expansion MRR is the growth input in the net revenue retention calculation. Strong expansion MRR can offset contraction and churn from the same cohort, which is why companies with high net revenue retention can grow overall MRR even when new logo acquisition is slow.
Put these metrics to work
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