Net MRR Calculator

The maths behind it

Net new MRR is the sum of the four movements: new + expansion − contraction − churned. It is the change in the recurring base over a period.

Reporting it as a single net figure hides which components are moving, which is why the standard presentation shows all four.

The quick ratio, (new + expansion) ÷ (contraction + churned), condenses the same information into one number describing growth efficiency.

Putting numbers to it

New $6,200, expansion $2,200, contraction $1,740, churned $4,060. Net new MRR is $2,600.

The quick ratio is $8,400 ÷ $5,800 = 1.45, meaning the business adds $1.45 for every dollar it loses.

A ratio around 4 is the conventional target for an efficient growth business. At 1.45 this one is growing while working hard to replace what it loses.

Cutting churn in half would give a ratio of 2.9 and net new MRR of $5,570, more than doubling growth with no additional acquisition at all.

Where it is unreliable

A healthy net figure can hide deteriorating components, since rising new business can offset worsening churn for a long time before the trend becomes visible in the total.

Expansion also flatters the number in businesses where it comes from price increases rather than genuine account growth, and those are not equally durable.

How to act on this

Chart all four components over time rather than the net line. Deterioration in churn or contraction is visible months earlier there than in the total.

Then calculate the quick ratio as a single efficiency measure. It is the fastest way to see whether growth is being achieved by adding or by outrunning losses.

What the quick ratio identifies that growth rate does not

Two businesses growing at the same rate can have completely different underlying efficiency: one adding $8,400 and losing $5,800, another adding $3,200 and losing $600.

The second is a fundamentally better business. It retains what it wins, so every dollar of acquisition spend compounds rather than replacing something lost.

Growth rate treats them identically. The quick ratio separates them immediately, which is why it has become a standard diagnostic despite being a simple ratio of numbers already being reported.

Plotting the four components as a waterfall makes the month legible at a glance and is the standard presentation for good reason, the shape of the bars communicates more than the numbers do.

It also makes deterioration in any single component obvious to people who would not spot it in a table.

Reviewing the largest individual movements each month, rather than only the totals, usually explains most of the variance and takes minutes.

A single large account moving in either direction frequently accounts for more than every other change combined.

Setting a target for each component separately, rather than for the net figure, gives the team something specific to work on and makes accountability clearer.

Reviewing the components against the previous three months rather than only the last one distinguishes a genuine trend from a single unusual month.