How to decompose MRR?

MRR (Monthly Recurring Revenue) is a key metric for subscription business models, reflecting the monthly recurring income. Decomposing MRR helps understand the sources of income and how it changes.

Main components of MRR decomposition:

• New MRR — income from new customers acquired in the current month.
• Expansion MRR — additional income from existing customers, for example, through upgrades or purchasing additional services.
• Churned MRR — lost income due to customer churn or downgrades.
• Reactivation MRR — income from customers who returned after a break.

Example:

MRR_current = MRR_previous + New MRR + Expansion MRR - Churned MRR + Reactivation MRR

This approach allows analyzing growth dynamics, identifying reasons for losses, and planning monetization strategies.