What is Contraction MRR?
Contraction MRR is the monthly revenue you lose when existing customers reduce their subscription but don’t cancel. This happens when a customer moves to a cheaper plan, removes seats, or drops an add-on.How to Calculate It
Contraction MRR = Previous MRR amount − New MRR amount (for each customer who decreased)Example: a customer was on the $99/month plan and contracts to $49/month. Contraction MRR = $99 − $49 = $50 If 2 customers contract this month:
- Customer A: $99 → $49 = $50
- Customer B: $149 → $99 (removed seats) = $50
Where It Fits
Contraction MRR is one of five MRR movement types: Net New MRR = New + Expansion + Reactivation − Contraction − Churn Contraction is a warning sign. The customer didn’t leave, but they’re paying less. If contraction keeps growing, churn often follows. Bigdelta tracks Contraction MRR automatically as an activity on each account.FAQ
Contraction vs Churn MRR?
Contraction vs Churn MRR?
Contraction = customer reduced their plan but stayed. Churn = customer cancelled completely.
Is contraction always bad?
Is contraction always bad?
Usually. But sometimes a contraction keeps a customer who would have otherwise cancelled. A smaller payment is better than no payment.