Expansion MRR / Upgrade MRR
Definition
Expansion Monthly Recurring Revenue (MRR) or “Upgrade MRR” is the additional MRR that your business generates over the month from your existing recurring customers and not new revenue that is generated from the acquisition of new customers. This revenue can be derived from upselling, cross selling, add-ons such as additional feature purchases or an increase in feature limit.
How is Expansion MRR / Upgrade MRR calculated?
The formula for calculating Expansion MRR / Upgrade MRR is:
Expansion / Upgrade MRR = ( Sum of revenue generated by customers that increase their MRR vs last month, during the period by your business) x100
OR, you might view this metric as a % rate:
Expansion MRR % = (MRR at End of Month – MRR at Start of Month) ÷ MRR at Start of Month
One key addition to the formula is that this has to be a comparison of the same customers at the end of the month vs the start of the month, you can't include new customers.
Example:
At the start of May you have an MRR of $5,000 and from the same customers you end may with an MRR of $6,000. This has seen an expansion in your MRR of 20%.
$1000 (difference in MRR between end of month and start of month) / $5000 (starting MRR).
What counts as an upgrade?
These items all count in the upgrade measure:
Customer moving from a lower price plan to a higher cost plan.
Customer adding an additional plan to their existing plan.
Discounts being removed from a plan do not count as an upgrade.
