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Revenue metrics

Contraction MRR

Recurring revenue lost from customers who stayed: downgrades, removed seats, dropped add-ons and reduced commitments.

Contraction MRR is revenue lost from customers who did not leave. They downgraded, removed seats, dropped an add-on or renewed at a lower commitment.

Contraction is the early warning that churn is not. A customer who halves their seat count has usually decided something before they decide to leave, and the gap between the two is the window in which the account can still be saved.

It is separated from churn because the response is different: a contracting account is a conversation, a churned account is a win-back campaign.

Related terms

  • Expansion MRR Additional recurring revenue from existing customers: upgrades, added seats, add-ons and contracted usage growth, excluding anything from new customers.
  • Churned MRR Recurring revenue lost from customers who cancelled outright in the period, whether they chose to leave or their payments stopped working.
  • NRR (Net Revenue Retention) Revenue this period from a cohort of existing customers, divided by what that same cohort paid a year ago, including expansion, contraction and churn.