The Truth About MRR: What Most SaaS Founders Get Wrong

I spent three years at Stripe watching thousands of SaaS founders obsess over one number: Monthly Recurring Revenue. But here’s the uncomfortable truth—most of them were looking at it wrong.

They’d celebrate hitting $100K MRR, pop champagne, post on Twitter. Then three months later, they’d be back at $95K, confused about what happened. The problem? They were treating MRR like a scoreboard instead of a diagnostic tool.

MRR Isn’t a Number—It’s a Story

When you look at your Stripe dashboard and see “MRR: $127,453,” you’re not seeing the full picture. You’re seeing the outcome of four competing forces battling inside your business:

1. New MRR — Revenue from customers who didn’t exist last month

2. Expansion MRR — Additional revenue from existing customers (upgrades, add-ons, usage growth)

3. Churned MRR — Revenue lost from customers who cancelled

4. Contraction MRR — Revenue lost from customers who downgraded

The actual formula that determines your fate:

Net New MRR = New MRR + Expansion MRR - Churned MRR - Contraction MRR

If this number is positive, you’re growing. If it’s negative, you’re dying—no matter what your top-line MRR says.

The Mistake That Kills Growth

Here’s where most founders go wrong: they optimize for New MRR and ignore everything else.

They’ll pour $50K into ads to acquire $10K in new MRR, celebrating the top-line growth. Meanwhile, $8K in expansion opportunities sit untapped, and $7K churns out the back door because nobody’s paying attention to why customers leave.

“Revenue is vanity, profit is sanity, but cash flow is reality.” — The old adage is half right. In SaaS, Net New MRR is reality.

At Stripe, I watched a company go from $2M to $8M ARR in 18 months. Their secret? They weren’t the best at acquisition. They were obsessive about the other three levers:

• They implemented usage-based upsells that drove 40% expansion MRR

• They built an early warning system that cut churn from 8% to 3%

• They eliminated the smallest plan tier, reducing contraction MRR by 60%

Why Your Stripe Data Is Lying to You

Stripe is brilliant for processing payments. It’s terrible for understanding growth.

Stripe will tell you:

• Customer X paid $99 on November 15th
• Customer Y cancelled their subscription
• Customer Z upgraded to the Pro plan

What Stripe won’t tell you:

• How much of this month’s growth came from expansion vs. new customers

• Which cohorts are churning fastest

• Whether your Net New MRR is accelerating or decelerating

• If you have a revenue quality problem hiding behind top-line growth

This is why we built Mowt. We connect to your Stripe account and decompose every dollar of revenue change into these four categories. No spreadsheets. No manual tagging. Just truth.

The Three Questions That Matter

Stop asking “What’s our MRR?” Start asking:

1. What’s our Net New MRR trend?

If it’s declining month-over-month, your growth is decelerating—even if top-line MRR looks healthy. This is your early warning system.

2. What’s our Expansion MRR as a percentage of New MRR?

Best-in-class SaaS companies see 30-40% expansion rates. If yours is below 20%, you’re leaving money on the table. If it’s above 50%, you might have a weak acquisition engine.

3. What’s driving our churn?

Not all churn is equal. Losing $100K customers to competitors is different than losing $10 customers to credit card failures. You need to know the difference.

The Framework: From Diagnosis to Action

Here’s how to actually use MRR data to grow:

Month 1: Baseline

• Calculate your four MRR components for the last 6 months
• Identify which lever is your biggest weakness
• Set realistic improvement targets (don’t try to fix everything at once)

Month 2-3: Focus

• Low expansion? Ship usage-based pricing or feature-tiered upsells
• High churn? Interview churned customers and build a win-back campaign
• Weak new MRR? Don’t just buy more ads—figure out why conversion is low

Month 4+: Compound

• Small improvements compound violently in subscription businesses

• A 2% monthly reduction in churn = 24% more revenue in year two (try our MRR forecaster to model this)

• A 10% increase in expansion MRR = 50%+ boost to growth rate

What This Looks Like in Practice

One of our Mowt customers, a project management SaaS, was stuck at $400K MRR for nine months. Their Stripe data showed “steady state”—losing and gaining roughly the same amount each month.

We helped them decompose it:

• New MRR: +$45K/month (healthy)
• Expansion MRR: +$3K/month (broken)
• Churned MRR: -$38K/month (bleeding)
• Contraction MRR: -$10K/month (problem)

The issue was obvious once exposed: they had a leaky bucket. They fixed two things:

1. Built automated workflows to drive power users to the next plan tier
2. Implemented quarterly check-ins for customers showing usage decline

Six months later:

• New MRR: +$48K/month (slight improvement)
• Expansion MRR: +$21K/month (7x increase)
• Churned MRR: -$22K/month (cut in half)
• Contraction MRR: -$4K/month (reduced by 60%)

Their Net New MRR went from +$0 to +$43K/month. They’re now at $850K MRR and accelerating.

The Bottom Line

MRR is not a vanity metric. It’s not a number you track once a month in a spreadsheet. It’s a real-time diagnostic system that tells you exactly where your business is healthy and where it’s sick.

But only if you break it down correctly.

Stop celebrating top-line MRR growth. Start obsessing over Net New MRR and the four levers that drive it. That’s how you build a SaaS business that compounds instead of stalls.

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Ready to see the truth about your metrics? Connect your Stripe account to Mowt and get instant MRR decomposition, cohort analysis, and growth diagnostics—no spreadsheet required.