Contraction MRR Rate Calculator

How to calculate Contraction MRR Rate?

Contraction MRR Rate measures the percentage of recurring revenue lost from existing customers who downgrade their plans without churning.

Formula: Contraction Rate = (Contraction MRR / Starting MRR) × 100

Using the calculator: an example

If you begin the month with $50,000 in Starting MRR and customers downgrade services totaling $2,500.

Step-by-step calculation:

• Identify the Starting MRR ($50,000)
• Total all revenue lost from downgrades ($2,500)
• Divide 2,500 by 50,000 to get 0.05
• Multiply by 100 to reach a 5% contraction rate

Frequently Asked Questions

What is the difference between Contraction and Churn?

Churn occurs when a customer cancels entirely, while contraction happens when a customer stays but pays less than before.

Is a high contraction rate always bad?

Generally yes, as it indicates users are deriving less value or finding your lower tiers more appropriate for their current needs.