What is Expansion MRR?
Expansion MRR is the additional revenue coming from your existing customers. It is a key metric that informs marketing efforts and helps maximize returns. You should track four types of expansion MRR during evaluation and planning.
Expansion MRR is a very important metric that can better inform marketing efforts to maximize returns. There are four types of expansion MRR, and it's vital to use all of them during evaluation and planning.
Types of Expansion MRR
Expansion MRR represents additional monthly recurring revenue from existing customers through four key activities: upsells (additional products), add-ons (extra features), and reactivations (resumed subscriptions).
Upsells — moving from a free plan to a priced plan or from a lower-priced plan to a higher-priced one.
Cross-sells — purchase of other additional non-core products you offer
Add-ons- purchasing of other recurring add-ons that are not part of the customer's current subscription plan.
Reactivation- Reactivating a canceled subscription.
How to Calculate Expansion MRR
Calculate expansion MRR monthly to track customer growth and inform retention strategies. The formula measures percentage growth in expansion revenue:
[(Expansion MRR at the end of the month – Expansion MRR at the beginning of the month) / Expansion MRR at the beginning of the month] x 100 = Expansion MMR percentage rate
For example, if your expansion MRR at the beginning of the month is $2,000 and $3,000 at the end of the month, the expansion MRR rate would be:
[(3000-2000) / 2000] * 100 = 50%
The expansion MRR percentage is 50%
Expansion MRR rate formula
The expansion MRR rate shows growth from existing customers as a percentage. You calculate it by dividing the total expansion MRR for the period by the MRR at the start of the period. This helps you benchmark performance against churn and track growth momentum.
How to interpret expansion MRR
An increase in this number indicates revenue growth from your existing customer base and is a great sign. You should not solely rely on this metric to gauge customer satisfaction, because it can be misleading if you are losing many customers each month. You should use this metric to get a better picture of current customer loyalty and retention, which can inform your marketing and retention efforts.
For this reason, it is essential to keep an eye on your churn while looking at this metric.
Churn can mean two things: the number of customers you lose (customer churn)and the amount of revenue you lose (revenue churn). However, negative churn is good. Your company would have a negative churn rate when current customers stay subscribed and spend more money in the current month than they did in the previous month, which directly correlates with expansion MRR.
Why Expansion MRR Matters for SaaS Growth
Expansion MRR delivers three critical benefits for RevOps teams:
Zero acquisition cost: Generate additional revenue without Customer Acquisition Costs (CAC)
Higher customer lifetime value: Existing customers who expand spend more over time, increasing customer lifetime value (LTV)
Operational efficiency: No additional sales or marketing resources required for expansion revenue
Recent research shows that 67% of companies using hybrid pricing models expect improved margins, with top-performing SaaS companies achieving 10-30% annual expansion rates through existing customer growth.
Expansion MRR Benchmarks and Performance Indicators
According to a 2023 Forrester report, high-growth SaaS companies achieve:
10-30% annual expansion rates for established businesses
40% higher growth likelihood when expansion exceeds churn
Improved margins through hybrid pricing models (67% of companies report success)
Relationship to Net Revenue Retention and Churn
Expansion MRR is a direct input for Net Revenue Retention (NRR). A high expansion MRR can offset revenue lost to churn, pushing your NRR above 100%. This is a key indicator of a healthy, scalable subscription business for investors and leadership.
How to Use Expansion MRR to Drive Revenue Growth
Four proven strategies to increase expansion MRR:
Monitor customer usage patterns: Track product engagement to identify upsell opportunities and prevent downgrades
Create attractive upgrade paths: Use discounts and trial periods to reduce upgrade friction, but validate cash flow impact first
Automate upgrade processes: Set up self-service upgrades to improve the customer experience and reduce support overhead
Use customer feedback: Proactively market higher subscription models by addressing specific pain points and value propositions.
See how Chargebee helps you monetize with confidence — book your personalized demo today.
Frequently Asked Questions About Expansion MRR
What's the difference between expansion MRR and net revenue retention?
Expansion MRR measures only revenue growth from existing customers, while NRR includes expansion, contraction, and churn from the same cohort.
How does expansion MRR relate to negative churn?
Negative churn occurs when expansion MRR exceeds revenue lost to churn and downgrades, indicating existing customers generate more revenue than you lose.
What's considered a good expansion MRR rate?
For established SaaS businesses, expansion revenue is increasingly important. Some companies generate up to 40% of their total new Annual Recurring Revenue (ARR) from existing customers. The key is to consistently outperform your revenue churn rate.
Should reactivation revenue count as expansion MRR?
Yes, reactivated subscriptions within a defined period count as expansion MRR since they represent regained revenue from existing customer relationships.
Additional Reads
The Ultimate Guide to Revenue Operations - See how you can drive efficiency into your RevOps with our extensive guide. Get the guide
What is Net Revenue Retention (NRR)?
Understanding Churn Benchmarks and Retention Strategies
