Contraction MRR
Contraction MRR is recurring revenue lost from customers who reduce spend but remain customers — fewer seats, a lower tier, a negotiated discount. It sits between expansion and churn in the MRR bridge.
Formula
Worked example
A customer dropping from a $900/month plan to $600/month contributes $300 of contraction MRR — they still count as a retained logo, but a third of their revenue is gone.
Contraction is churn's early-warning system: customers rarely leave in one step, they shrink first. A rising contraction line with flat churn usually predicts a churn spike two or three quarters out.
It also distorts logo-based metrics — logo retention can look perfect while contraction quietly erodes revenue. This is exactly why revenue-weighted measures (GRR, NRR) exist.
Compute it: SaaS quick ratio calculator