Free Contraction Rate Calculator
Calculate the contraction rate to measure revenue lost from existing customers due to downgrades, reduced usage, or discounts.
Contraction Rate
4.00%
Contraction Rate vs Contraction MRR (revenue lost from downgrades)
How to Calculate Contraction Rate
Formula
Contraction Rate = (Contraction MRR / Starting MRR) x 100
Contraction measures the revenue you lose from existing customers who stay but spend less. This happens when customers downgrade their plan, remove seats, reduce usage on metered billing, or receive discounts. Contraction is softer than full churn, but it still erodes your revenue base and deserves close tracking.
Example Calculation
A company starts with $200,000 MRR and loses $8,000 from customer downgrades.
- 01Contraction Rate = ($8,000 / $200,000) x 100 = 4%
- 02Annualized Contraction = $8,000 x 12 = $96,000
- 034% of existing MRR contracted due to downgrades.
Frequently Asked Questions
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