Definition
Net new MRR is the net change in recurring revenue in a period after accounting for new customers, expansions, downgrades, and churn. It is a fast read on momentum.
Formula
Net new MRR = new MRR + expansion MRR - contraction MRR - churned MRR
How to calculate net new MRR
- Measure new MRR from customers that became paying in the period.
- Measure expansion MRR from existing customers in the same period.
- Measure contraction MRR (downgrades) and churned MRR (cancellations).
- Apply the net new MRR formula to get the net change.
Net new MRR vs growth rate
- Net new MRR is a dollar amount.
- MRR growth rate is usually net new MRR / starting MRR for the period.
- Use growth rate for comparing across time; use net new MRR for planning capacity and targets.
Operational checklist
- Reconcile starting MRR + movements to ending MRR each month.
- Separate reactivations and price increases from expansion.
- Validate churn classification (downgrade vs cancellation).
- Review net new MRR by segment to catch hidden churn pockets.
Common mistakes
- Mixing MRR movements with invoices or cash receipts.
- Counting reactivations inconsistently (label them clearly).
- Comparing months without adjusting for annual billing seasonality and deal timing.