Expansion MRR/ARR
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
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.