What is Expansion MRR?
Expansion MRR is the additional recurring revenue you earn from customers you already have. Upgrades to a higher plan, extra seats, add-on modules and price increases all count; a new customer never does.
Expansion is the cheapest revenue in the business. There is no acquisition cost, no onboarding from scratch and no trust to build, which is why companies with strong expansion can grow through periods when new sales stall.
It is measured as the increase, not the new total. A customer moving from $200 to $350 a month contributes $150 of expansion MRR, and continues contributing $350 to MRR.
Reactivation is deliberately kept separate. A customer who cancelled and came back is not expanding, they are returning, and mixing the two hides both.
How to calculate Expansion MRR
Expansion MRR = sum of MRR increases on customers active at the start of the period
- MRR increase
- new subscription MRR minus previous subscription MRR, when positive
- active at the start
- excludes new customers, whose MRR is new business instead
Expansion MRR example
Given
- 12 customers add seats, together worth $780 more per month
- 4 customers upgrade tier, together worth $670 more per month
- 3 new customers sign up for $1,100 a month between them
Expansion of $1,450 against $48,000 of starting MRR is roughly 3% of the book bought back from existing customers, before any new sale.
Why Expansion MRR matters
- It is what pushes net revenue retention above 100%, which is the point where revenue compounds without acquisition.
- It comes with no acquisition cost, so it flows to the bottom line far more directly than an equivalent new sale.
- The expansion pattern tells you whether your pricing is aligned with the value customers get. If accounts grow but revenue does not, your pricing metric is wrong.
Common Expansion MRR mistakes
Counting the whole new amount instead of the increase
An upgrade from $200 to $350 is $150 of expansion. Recording $350 double counts the $200 already sitting in MRR.
Folding reactivation into expansion
A returning customer is a different event with a different cause. Merged together, you cannot tell recovery from growth.
Netting expansion against contraction before reporting
A month where $5,000 of upgrades offset $5,000 of downgrades is not a quiet month. Reporting a net zero hides a lot of movement in both directions.
How Kometrics computes Expansion MRR
Every increase in a customer's MRR lands in the ledger as an expansion movement with the amount of the increase, and Kometrics reports it two ways. The MRR Movements report sums the raw movements, so a customer who upgrades twice in a month appears twice. The Net MRR Movements report combines each customer's movements within the month into one net movement first, so a customer who upgrades and then downgrades shows up once, under whichever direction won.
Both are correct and they answer different questions, which is why Kometrics keeps them side by side rather than picking one.
Related terms
Contraction MRR is recurring revenue lost from customers who stayed: downgrades, removed seats, dropped add-ons and expired discounts running the other way. The customer is still yours, they are simply worth less.
Net MRR movementNet MRR movement is the total change in MRR over a period once every movement is added up: new business, expansion and reactivation on one side, contraction and churn on the other. It is the bridge between where MRR started and where it ended.
NRRNet revenue retention is what happened to the revenue you already had. Take a cohort of existing customers, add the expansion they bought, subtract what they downgraded or cancelled, and compare against what they were worth at the start. New customers are excluded by definition.
MRRMRR is the normalized monthly value of every active subscription you have right now. It is a run rate, not a cash figure: it answers what a month of your current book is worth, not what landed in the bank.
Get this number from your billing data
Kometrics connects to Stripe, Paddle, Creem and Asaas and computes Expansion MRR continuously, with every movement behind it. Free under $1,000 MRR.
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