What is Contraction MRR?
Also known as: Downgrade MRR, downsell MRR
Contraction MRR is recurring revenue lost when an existing customer downgrades — a smaller plan, fewer seats, lower usage — without fully churning.
What is Contraction MRR?
When a customer reduces their subscription value but stays a customer, the lost MRR is contraction (not churn). Common causes: seat reductions, plan downgrades, removed add-ons, lower usage on a usage-based plan.
How to calculate Contraction MRR
Contraction MRR = sum of MRR reduced from existing customers in the period.
Does not include customers who fully churned (that is churn MRR). Does not include new logos who took a smaller-than-expected plan.
Contraction vs Churn vs Expansion
Expansion MRR (positive) and Contraction MRR (negative) both happen with existing customers. Churn MRR is a customer who fully cancelled. NRR captures all three: NRR = (Start + Expansion − Contraction − Churn) / Start.
Why it matters
Contraction is the quieter leading indicator of churn. Customers downsize before they leave. Watching monthly contraction MRR (separately from churn) catches the slow bleed early.