Definition
Contraction MRR is the reduction in recurring revenue from existing customers due to downgrades or reduced usage/seats (not full churn).
How to use it
- Track contraction separately from churn to understand product value vs cancellations.
- Segment contraction by plan and lifecycle stage to locate downgrade drivers.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Contraction MRR" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., GRR Calculator) to sanity-check assumptions.
- Read the related guide (e.g., GRR (Gross Revenue Retention): definition, formula, how to calculate) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- GRR Calculator: Calculate Gross Revenue Retention (GRR) from starting MRR, contraction, and churn.
- NRR vs GRR Calculator: Calculate NRR and GRR together from the same starting MRR and expansion/contraction/churn inputs.
- MRR Forecast Calculator: Forecast MRR over time using new MRR plus expansion, contraction, and churn rates.
- Revenue Retention Curve Calculator: Model GRR and NRR over time from monthly expansion, contraction, and churn assumptions (existing cohort only).
- Retention Targets Planner (NRR/GRR): Compute required expansion (for a target NRR) and allowable churn+contraction (for a target GRR) using monthly rates.
Guides
- GRR (Gross Revenue Retention): definition, formula, how to calculate: GRR explained: gross revenue retention definition, GRR formula, how to calculate it, and why it matters alongside NRR.
- Retention & churn hub: cohorts, GRR/NRR, and retention curves: A practical hub for retention measurement: churn rate, GRR/NRR, cohort retention curves, and how to set retention targets without getting misled by noise.
- NRR vs GRR: differences, formulas, and how to use both: NRR includes expansion; GRR excludes it. Learn when each metric matters, how to compute both from the same cohort, and how to interpret the gap.
- MRR forecasting: a simple bridge model (new, expansion, churn): A practical way to forecast MRR using a monthly bridge: starting MRR + new MRR + expansion - contraction - churn.
- Revenue retention curves: GRR vs NRR over time (how to model): A practical guide to revenue retention curves: how GRR and NRR compound, how to interpret expansion vs churn, and how to avoid common mistakes.