Table of contents
Expansion MRR/ARR
TL;DR
Expansion MRR (or ARR) is the recurring revenue generated from existing customers who upgrade, add seats, expand usage, or purchase new modules. This metric reflects the revenue-driving power of your post-sale experience and your team’s ability to identify and close growth opportunities inside the base. For sales teams in SaaS, expansion is often the fastest path to growth — especially when acquisition costs are rising.
What is Expansion MRR/ARR?
Expansion MRR or ARR represents any increase in recurring revenue from current customers — not net-new logos. This can come from seat additions, plan upgrades, usage increases (if billed monthly), cross-sells to new products, or contract expansions.
Formula:
Expansion MRR = Total increase in MRR from existing accounts
Expansion ARR = Total increase in ARR from existing accounts
Note: If a customer upgrades from $500/month to $750/month, the $250 is counted as Expansion MRR.
Expansion revenue is typically tracked separately from new and renewal revenue to understand which motions — land-and-expand, product-led growth, success-led growth — are truly working.
Why It Matters in B2B SaaS
- It shows how valuable your product is post-sale. Expansion means customers are getting enough value to pay more.
- It drives Net Revenue Retention (NRR). Higher expansion offsets churn and drives healthier unit economics.
- It supports bottom-up sales motions. In PLG or multi-seat SaaS, expansion is often how large deals grow from small starting points.
- It signals sales and success alignment. Expansion only happens when onboarding, support, and product deliver — and when Sales or CS actively identify upsell timing.
- It’s low-CAC growth. Expanding an existing customer is cheaper and faster than acquiring a new one.
How to Measure Expansion MRR/ARR
- Track all recurring revenue increases from accounts that were already active
- Calculate the difference between old and new monthly/annual contract values
Include:
- Seat or license increases
- Plan upgrades
- Cross-sells of recurring products
- Usage-based revenue (only if billed monthly/annually)
Exclude:
- New customers
- One-time charges
- Renewals with no increase in value
Best Practices
- Set up pipeline stages for expansion opportunities in your CRM
- Coordinate with CS teams to identify product champions and usage signals
- Use product analytics to trigger timely upsell conversations
- Segment expansion by product/module to see which ones are driving the most growth
- Incentivize reps on expansion where GTM structure supports it
Final Thought
Expansion MRR/ARR is a sign that your product delivers real, ongoing value — and that your team knows how to turn relationships into revenue. Whether you’re an AE managing the full lifecycle or a CS team member surfacing upsell opportunities, expansion shows that the trust you built during the initial sale is translating into long-term, compounding growth.
FAQs
What’s the difference between expansion and renewal?
Renewals keep the contract value the same. Expansions increase it through upsells, upgrades, or added seats.
Should SDRs be involved in expansion?
Not usually. Expansion is most often handled by AEs, Account Managers, or CS teams — though RevOps may analyze usage trends.
How does expansion impact NRR?
It improves NRR by increasing revenue from retained customers. The more expansion you generate, the more resilient your business becomes.
Should expansion deals be tracked like net-new in the CRM?
Yes, but tagged clearly as “Expansion” in your opportunity type field to separate from new logo acquisition.
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