Contraction MRR (Downgrade MRR) Calculator

What is Contraction MRR? Contraction MRR is the decrease in recurring revenue from your existing customer base caused by customers paying less than before (downgrades, seat redu...

Contraction MRR Calculator

Calculate Contraction MRR (downgrades from existing customers) and the resulting Ending MRR for a selected period. Note: “Contraction MRR” here is the dollar change over the selected period (non-compounded), not necessarily a monthly run-rate when Period is Quarterly/Annual.

$

MRR at the start of the selected period for your existing customer base. Exclude New MRR from new customers during the period.

Choose the time window. Any contraction rate you enter is interpreted per this period (e.g., 2% Quarterly means a 2% downgrade impact over the quarter).

Choose how you want to enter contraction. If you enter Contraction MRR ($), the contraction rate is computed as Contraction MRR ÷ Starting MRR.

%

Percent of existing-customer MRR lost to downgrades in the selected period (enter as a positive number). Example: 2% on $75,000 implies $1,500 contraction for the period.

$

Recurring revenue lost from existing customers due to downgrades (plan downgrades, fewer seats, reduced usage tiers). Excludes churn (cancellations). Enter as a positive number.

Scenarios
Try common presets. Scenarios use contraction rate (%) by default; switch Enter using if you prefer dollars.
Low downgrades (0.5%)Typical (2%)High (5%)Quarterly contraction (3%)

Results

  • Contraction (existing customers, for the selected period)$
  • Ending MRR (existing customers)$
  • Contraction rate (computed)— %

Enter your inputs above to calculate the results.

What is Contraction MRR?

Contraction MRR is the decrease in recurring revenue from your existing customer base caused by customers paying less than before (downgrades, seat reductions, plan changes, credits).

It matters because contraction weakens revenue quality and predictability, pressures Gross Revenue Retention (GRR) and Net Revenue Retention (NRR), and can impair LTV:CAC, CAC Payback Period, and long-range ARR planning.

Formula

Contraction MRR = Starting MRRexisting × Contraction Rate
Ending MRRexisting = Starting MRRexisting − Contraction MRR
Contraction Rate = Contraction MRR / Starting MRRexisting × 100

Example

Starting MRR (existing customers): $75,000

Period: Monthly

Contraction rate: 2%

Contraction MRR = 75,000 × 0.02 = 1,500
Ending MRRexisting = 75,000 − 1,500 = 73,500

Interpretation: $1,500 of recurring revenue leaked from the existing base due to downgrades, leaving $73,500 of existing-customer MRR before considering Expansion MRR, Churned MRR, and New MRR.

Frequently Asked Questions

Is Contraction MRR the same as Churned MRR?

No—Contraction MRR is typically revenue lost because existing customers downgrade or remove seats/add-ons, while Churned MRR is revenue lost when customers cancel entirely. Use Contraction to track downsells; use Churned MRR to track cancellations.

How do I calculate contraction rate from actual downgrades?
Add up the MRR lost from downgrades / downsells in the period, then ÷ ide by Starting MRR: Contraction Rate = Contraction MRR ÷ Starting MRR
Do discounts, paused subscriptions, or removed add-ons count as contraction?

If the change reduces recurring revenue from an existing customer for the period (discount applied, add-on removed, plan downgraded, subscription paused), treat it as contraction for that period.

How does Contraction MRR affect NRR/GRR and retention reporting?

Contraction directly lowers retention—GRR typically subtracts churn and contractions from Beginning MRR, and NRR adds expansion back in: GRR = (Beginning MRR − Churn MRR − Contraction MRR) ÷ Beginning MRR and NRR = (Starting MRR − Churn MRR − Contraction MRR + Expansion MRR) ÷ Starting MRR.

Sources & Methodology