MRR (Monthly Recurring Revenue)
MRR is not the month's revenue. It's the revenue the company would still collect even if it stopped selling starting tomorrow.
“An MRR that grows without a New vs. Expansion breakdown is a number that hides more than it reveals.”
Otto GTM ObservatoryThe breakdown that actually matters
Aggregate MRR is a starting point, not a health indicator. A company with stable MRR can hide strong New MRR offset by equally strong Churned MRR: same net growth, opposite commercial dynamics.
Breaking MRR into New, Expansion, Contraction, and Churned reveals whether growth comes from new acquisition, upsell on existing customers, or simply from not losing who's already there.
Anti-patterns
Frequent mistake: including one-off revenue (setup, onboarding, professional services) in MRR to inflate the number shown to the board and investors. The result is a projected ARR that never materializes.
Second mistake: looking only at net MRR without isolating Churned MRR, missing the most important warning signal for intervening before the problem becomes structural.
Practical Application
A SaaS company closes the month with €218,400 total MRR, made up of €31,200 New MRR, €14,800 Expansion MRR, -€6,100 Contraction MRR, and -€19,300 Churned MRR. Net growth is just €20,600, but the breakdown reveals that Churned MRR is eroding almost two-thirds of new acquisition: the problem isn't the sales funnel, it's retention.