Understand your monthy MRR growth
Understand the breakdown of your MRR changes
Identify where to improve: acquisition, retention, or expansion?
If your company is a SaaS company, then your MRR (or ARR) is your north star metric.
But beyond your raw MRR, it's to understand how the evolution of your MRR is broken down.
For example, if you see your MRR decreasing, it could be because lots of your existing customers downgraded to a cheaper plan (contraction), or because you lost some of your customers (churn). Your action plan won't be the same depending on what part of your MRR is decreasing / increasing.
Let's run through some definitions.
1/ New Business MRR
This is the additional MRR from new customers.
2/ Expansion MRR
This is the additional MRR attributable to existing customers who upgraded to a more expensive plan.
3/ Contraction MRR
As explained above, it's the loss or MRR due to existing customers downgrading to a cheaper plan
4/ Churn MRR
This is the the loss of MRR due to existing customers churning (ie stopped paying for your product)
5/ Reactivation MRR
This is new MRR from customers who had previously paid for your product and churned, and who now started paying again for your software.
6/ Net Revenue Retention rate
This is a very helpful metric. Your basically look at a constant scope (ie. only your existing customers) and see how much of your MRR from existing customers you retain.
The ideal is to have a Net Revenue Retention rate that's greater than 100%. That means the revenue from your existing customers is growing, which is extremely healthy.
With this template, you'll be able to calculate all these metrics and have them fully automated. You can use your Stripe data or data from your database / data warehouse.