Explain the movement behind the growth.
A recurring-revenue bridge separates gross additions from losses. Two businesses can show the same net growth while one retains its customers and the other continuously replaces lost revenue.
Classify each movement once using consistent customer-level records. Expansion and contraction belong to the starting cohort. Reactivation should follow a documented policy; this model includes it in new MRR if you choose to count it there.
The formula, made clear.
- Churn and contraction
- Positive loss magnitudes deducted from opening-cohort MRR.
- ARR change
- Twelve times net new MRR, a run-rate change rather than earned revenue.
Put the numbers in context.
$100,000.00 opening MRR plus $20,000.00 new and $10,000.00 expansion, less $3,000.00 contraction and $5,000.00 churn, closes at $122,000.00.
| Input | Example value |
|---|---|
| Opening MRR | $100,000.00 |
| New customer MRR | $20,000.00 |
| Expansion MRR | $10,000.00 |
| Contraction MRR | $3,000.00 |
| Churned MRR | $5,000.00 |
| Closing MRR | $122,000.00 |
What this calculation assumes
One month of normalized recurring revenue; no FX movements, accounting reclassification or acquisitions. Losses cannot exceed opening cohort MRR. Expansion is limited to that cohort, which must exist.
What to consider next.
Compare the gross retention of the opening cohort with new-customer acquisition and burn.
How we approach financial models →