Description
Expansion MRR rate is a SaaS metric that tells companies the rate at which their expansion monthly recurring revenue (MRR) is growing month over month. Expansion MRR is part of the monthly recurring revenue (MRR) that comes from additional revenue earned from existing customers. Simply put, expansion MRR does not consider revenue that may be earned from new customers.
Example
Expansion MRR calculation mainly involves comparing the current month to the previous month and the result is expressed as a percentage. This metric allows companies to know whether their existing customers are buying more or less of the product/service. Expansion MMR percentage rate = [(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 100Suppose Vareto's Expansion MRR at the start of Jan 2023 was $1,500 and at the end of the same month, it was $2,000.Expansion MRR rate = [($2,000 – $1,500)/$1,500] x 100 = 33.3%
Why it matters
With this metric, companies can track their revenue growth from existing customers. Companies value the additional revenue growth that they can achieve from existing customers since it is an indication that existing customers are happy and satisfied with the product or service. A high expansion MRR rate means that a company is able to gain higher revenues while retaining customers.The expansion MRR rate also indicates that the company is not incurring customer acquisition costs (CAC) to earn additional revenue. Thus, it makes for a cost-effective way of growing revenue.