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Contraction MRR

Recurring revenue lost from customers who stayed but reduced spend — fewer seats, a lower tier, a renegotiated rate.

The quiet metric

Contraction is easy to miss because the logo is retained and the relationship looks healthy. It frequently precedes churn by a renewal cycle, which makes it one of the better leading indicators available.

Track downgrade reasons

Contraction driven by seat reduction after a layoff is a different problem from contraction driven by unused features. Only the second is yours to fix.

RELATED TERMS

Churn

Customers or revenue lost over a period. The leak determining whether acquisition compounds or merely replaces.

Expansion Revenue

Additional recurring revenue from existing customers: more seats, higher tiers, additional products or increased usage.

Gross Revenue Retention (GRR)

Revenue retained from an existing cohort excluding expansion. Caps at 100% and measures only what was lost.

Net Revenue Retention (NRR)

Revenue retained from an existing cohort over a period including expansion, expressed as a percentage of where that cohort started. The clearest single indicator of whether the base grows without new customers.

FURTHER READING

How to Calculate Net Revenue Retention

NRR is the most cited SaaS metric and one of the most frequently miscalculated. The errors are consistent and each one flatters the number.

Learn how to apply this: RevOps 101: Revenue Operations Foundations

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