MRR Lab

MRR Waterfall Calculator

Visualize and forecast your Monthly Recurring Revenue (MRR) changes over time. Includes new, churn, expansion and contraction.

$100k

$20k

8.0%

3.0%

1.0%

12 months

What is an MRR Waterfall?

This MRR waterfall chart helps you understand how your Monthly Recurring Revenue (MRR) changes over time by breaking down the components that contribute to those changes:

  • New MRR: Revenue from new customers
  • Expansion MRR: Additional revenue from existing customers (upgrades, add-ons)
  • Contraction MRR: Lost revenue from existing customers (downgrades)
  • Churned MRR: Lost revenue from customers who cancel

How to Use This Calculator

  1. Enter your Current MRR - Your starting Monthly Recurring Revenue
  2. Input your New MRR - Monthly revenue from new customers
  3. Set your rates:
    • Churn Rate - Monthly rate at which customers cancel (e.g., 0.08 = 8%)
    • Expansion Rate - Monthly rate of revenue growth from existing customers
    • Contraction Rate - Monthly rate of revenue decline from downgrades
  4. Choose the number of Forecast Months to project

The calculator will generate a waterfall chart showing MRR components forecast over time.

Understanding the Results

Key Metrics

  1. Net MRR Change

    • Formula: New MRR + Expansion MRR - Contraction MRR - Churned MRR
    • Indicates overall monthly revenue growth or decline

  2. Growth Efficiency

    • Formula: (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR)
    • Measures how effectively you're growing relative to revenue losses
    • Target: > 1.0 for sustainable growth

  3. Monthly Growth Rate

    • Formula: Net MRR Change / Current MRR
    • Shows percentage growth in MRR month-over-month

Tips for Improvement

  1. Reducing Churn

    • Improve onboarding and customer success
    • Identify at-risk customers early
    • Focus on product-market fit
    • Build strong customer relationships

  2. Increasing Expansion

    • Create clear upgrade paths
    • Offer complementary products/features
    • Implement usage-based pricing
    • Target high-potential customers

  3. Minimizing Contraction

    • Understand downgrade reasons
    • Provide value-based pricing
    • Offer flexible plans
    • Proactively engage with customers

  4. Optimizing New Business

    • Focus on ideal customer profile
    • Improve sales efficiency
    • Optimize pricing strategy
    • Enhance lead qualification

Related Metrics