How to calculate net new MRR
Sort every change in MRR during the period into four buckets. New MRR comes from customers who started paying. Expansion MRR comes from existing customers paying more. Contraction MRR is existing customers paying less. Churned MRR is the MRR of customers who left. Add the first two and subtract the last two.
The result always equals MRR at the end of the period minus MRR at the start, so you can check the buckets against the totals. If the two routes disagree, a change has been counted twice or missed.
Some businesses add a fifth bucket, reactivation, for customers who left and came back. Keep it separate from new MRR so returning customers do not flatter your acquisition numbers.
Net new MRR = new MRR + expansion MRR − contraction MRR − churned MRR
MRR growth rate = net new MRR ÷ MRR at the start of the period
Worked example
A business starts the month with $25,000 of MRR. It signs 16 new customers at $150 a month. Existing customers add $1,100 through upgrades and seats, downgrades cost $350, and cancellations take $900.
- New MRR: 16 × $150
- +$2,400
- Expansion MRR
- +$1,100
- Contraction MRR
- −$350
- Churned MRR
- −$900
- Net new MRR
- $2,250
- MRR at the end: $25,000 + $2,250
- $27,250
- MRR growth rate: $2,250 ÷ $25,000
- 9.0%
Losses of $1,250 were more than covered by $3,500 of new and expansion MRR. The same $2,250 could come from a very different month, which is why the four buckets matter as much as the total.
Why net new MRR matters
Net new MRR is the single number for how much recurring revenue the business added this month. Positive means it grew, negative means it shrank, and the size says by how much in dollars, not just in percent.
The breakdown is where the insight is. Two months with the same net new MRR can hide very different businesses: one adding a lot and losing a lot, the other adding a little and losing nothing. The first has a churn problem that more selling only postpones.
Common mistakes
- Reporting only the net figure A healthy total can hide rising churn when strong sales cover it. Show the four buckets next to the net.
- Counting annual renewals as new MRR An annual customer renewing is not new; their MRR was already in the base. Only a price change at renewal moves MRR.
- Counting trials as new MRR A trial adds nothing until its first paid period. It becomes new MRR on the day it converts.
- Adding currencies together Net new MRR in dollars plus net new MRR in euros is not one figure until you pick an exchange rate. Report each currency on its own.