Definition
The ratio of expansion MRR to contraction MRR within a period, showing whether existing accounts are net growing or shrinking.
Formula
Expansion MRR / Contraction MRR
How to measure
Divide total expansion MRR by total contraction MRR generated by the existing customer base within the same period.
Why track it
A ratio consistently above 1 indicates the existing base is healthily growing revenue, a precondition for achieving negative net churn.
Example
A company generating $20,000 in expansion against $8,000 in contraction reports a 2.5:1 expansion-to-contraction ratio.
FAQ
- What is Expansion-to-Contraction Ratio?
- The ratio of expansion MRR to contraction MRR within a period, showing whether existing accounts are net growing or shrinking.
- How do you calculate Expansion-to-Contraction Ratio?
- Expansion MRR / Contraction MRR
- Why track Expansion-to-Contraction Ratio?
- A ratio consistently above 1 indicates the existing base is healthily growing revenue, a precondition for achieving negative net churn.