Expansion MRR Growth Rate

There are several ways to express Expansion MRR, for example:

- I could say that we generated $8,000 in Expansion MRR last month (which would be the absolute value);
- I could say that Expansion MRR this month improved by 20% vs last month (a month over month change);
- I could say that 50% of our top line revenue came from Expansion MRR this month (i.e., a ratio of New to Expansion Revenue);
- or, using the Expansion MRR Growth Rate metric, I can say our monthly Expansion MRR Growth Rate was 5% (which is a true growth rate, looking at incremental growth as a percentage of total MRR).

Expansion Revenue is a key growth metric and becomes more and more powerful as you grow your customer base. It's also vital to build expansion opportunities into your customer's buying journey, as this, and this alone, is essential to help you overcome the downward forces of Gross Churn.

It's well known that selling to existing customers is significantly less costly than acquiring new customers. KeyBanc's Annual SaaS survey concluded that cross-sells and add-ons cost about 1/4 of what $1 of new revenue costs, and natural plan expansions cost as little as 1/5 of what it costs to acquire a new customer.

This all impacts your CAC Payback Period - your time to profitability - which for any cash strapped startup is a key early survival tactic. And, of course, if you can increase the amount each customer is paying you, then Lifetime Value (LTV) increases as well.

The most efficient and fastest growing companies spend a lot of time understanding how to benefit from healthy Expansion MRR. Everything is easier when you can count on your customer base contributing to your top line. Best in class companies are achieving Expansion MRR Ratios that are 20% to 40% of top line revenue each month.