The five categories of change — new business, expansion, reactivation, contraction, and churn — that together account for every rise or fall in monthly recurring revenue.
Net MRR movement = New MRR + Expansion MRR + Reactivation MRR − Contraction MRR − Churned MRR
A business starts the month at £20,000 MRR. It adds £1,800 of new business, £600 of expansion, and £150 of reactivation, while losing £250 to contraction and £900 to churn.
(£1,800 + £600 + £150) − (£250 + £900) = £2,550 − £1,150 = +£1,400 net movement, so ending MRR is £21,400 (7% monthly growth)
Every change to MRR falls into exactly one of five buckets. Three add revenue: new business MRR from first-time paying customers, expansion MRR from upgrades, added seats, and add-ons, and reactivation MRR from previously churned customers returning. Two remove it: contraction MRR from downgrades and churned MRR from outright cancellations. If a number moved and it does not fit one of the five, your categorisation is wrong somewhere.
Headline MRR is a net figure, and net figures hide problems. Two businesses can both grow £1,400 in a month — one adding £2,550 and losing £1,150, the other adding £6,000 and losing £4,600. The second is refilling a leaky bucket that gets more expensive every month, and a single growth number cannot tell them apart. This is why investors ask for an MRR waterfall (also called an MRR bridge) rather than one net figure.
The most common mistake is miscategorising movements at the customer level. A customer switching from a £50 plan to a £30 plan is £20 of contraction, not £50 of churn plus £30 of new business. A returning customer is reactivation, not new business. And a renewing annual plan is no movement at all — provided you normalised it to a monthly value; unnormalised annual billing creates phantom spikes of new and churned MRR.
Your movement mix is a diagnostic that tells you which growth lever to pull next. Early-stage businesses grow almost entirely on new business, but the mix shifts with scale. If churn and contraction dominate your losses, fix retention and dunning before spending more on acquisition; if expansion is near zero at scale, you likely have a pricing and packaging problem rather than a marketing one.
A single MRR number tells you that you grew; the movements tell you why, and whether it will last. Splitting growth into its five components shows whether you are acquiring your way past a leaky bucket, whether upgrades are pulling their weight, and which lever deserves your next quarter of effort. It is also the format investors expect — an MRR waterfall is a standard ask in any SaaS fundraise or board deck.
ChartMogul's Growth Levers report (2025) found outlier SaaS companies reaching $20M ARR sourced 34.7% of net-new MRR from expansion and 3.8% from reactivation, up from 15.4% and 1.7% respectively at $1M ARR — the movement mix shifts steadily away from pure new business as companies scale.
New business MRR (revenue from first-time customers), expansion MRR (upgrades and add-ons from existing customers), reactivation MRR (churned customers returning), contraction MRR (downgrades), and churned MRR (cancellations). The first three add MRR, the last two remove it, and together the five explain every change in your MRR.
Net MRR movement = new MRR + expansion MRR + reactivation MRR − contraction MRR − churned MRR. Add it to your starting MRR to get your ending MRR for the period. If the result is positive your MRR grew; if negative, losses outpaced additions.
Contraction. Churned MRR only applies when a customer cancels entirely and their recurring revenue goes to zero. A customer moving from a £50 plan to a £30 plan is £20 of contraction MRR — counting it as churn plus new business double-counts the movement and inflates both figures.
MRR movements are the five individual categories of change; net new MRR is their sum — the single net figure showing how much MRR grew or shrank in a period. Movements are the breakdown, net new MRR is the total. See our net new MRR definition for the netted view.
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