Expansion Revenue Calculator Formula
Understand the math behind the expansion revenue calculator. Each variable explained with a worked example.
Formulas Used
Expansion Revenue Rate
expansion_rate = starting_mrr > 0 ? (expansion_mrr / starting_mrr) * 100 : 0Annualized Expansion Revenue
expansion_arr = expansion_mrr * 12Variables
| Variable | Description | Default |
|---|---|---|
expansion_mrr | Expansion MRR (new revenue from existing customers)(USD) | 20000 |
starting_mrr | Starting MRR(USD) | 200000 |
How It Works
How to Calculate Expansion Revenue Rate
Formula
Expansion Rate = (Expansion MRR / Starting MRR) x 100
Expansion revenue is the additional monthly revenue earned from customers who already pay you, through plan upgrades, seat additions, premium features, or complementary product purchases. A healthy expansion rate can offset churn entirely, leading to net revenue retention above 100%.
Worked Example
A SaaS company with $200,000 starting MRR gains $20,000 in expansion revenue from existing customers.
- 01Expansion Rate = ($20,000 / $200,000) x 100 = 10%
- 02Annualized Expansion = $20,000 x 12 = $240,000
- 03Existing customers are growing their spend by 10% each period.
Frequently Asked Questions
What drives expansion revenue?
Common drivers include seat-based pricing (team growth), usage-based billing (increased consumption), feature upsells (moving to higher tiers), and cross-selling complementary products to the same customer.
How important is expansion revenue?
Very. It costs 5-7x less to expand an existing customer than to acquire a new one. Companies with strong expansion revenue can achieve net negative churn, meaning they grow even without acquiring new customers.
Ready to run the numbers?
Open Expansion Revenue Calculator