What Is Expansion Revenue (MRR) in SaaS?

1. What is it?

Expansion revenue is the additional revenue generated from existing customers through activities such as upselling, cross-selling, add-ons, and increased usage. It reflects your ability to grow accounts after they’ve converted — which is a core lever of Net Revenue Retention (NRR).

In a subscription-based SaaS model, expansion revenue is what makes your recurring revenue engine more efficient — you grow without acquiring new customers.

2. Why is it important?

Why is expansion revenue more efficient than acquisition?

Acquiring new customers is expensive — that’s where CAC (Customer Acquisition Cost) kicks in. But expanding revenue from existing accounts doesn’t carry those same costs. The infrastructure, trust, and product learning curve are already in place.

Harvard Business Review famously noted that increasing retention by 5% can boost profits by 25–95%. A key part of that profitability comes from expansion revenue.

How does it relate to NRR?

Net Revenue Retention (NRR) is calculated by looking at existing customer revenue over a time period — including expansion, minus churn and contraction. High-performing SaaS companies aim for an NRR of 120% or more, meaning their existing base grows even without acquiring anyone new.

Formula:
NRR = (Starting MRR + Expansion - Churn - Contraction) / Starting MRR

Expansion revenue is the only part of this equation that pushes the number above 100%. It's what transforms retention from a defense game into a growth engine.

What types of expansion revenue exist?

  • Upsell: Moving from a lower-tier to a higher-tier plan
  • Cross-sell: Purchasing related products or services
  • Usage-based growth: Paying more as usage increases (common in PLG)
  • Add-ons: Paying for extra seats, features, or integrations

Why should CS and product teams care?

Expansion opportunities are often discovered by customer-facing teams. Signals like high feature usage, team growth, or product champions can indicate upsell-readiness.

At Customerscore.io, we help identify these patterns in your user base — scoring and segmenting accounts that are primed for expansion.

FAQ

What’s the difference between expansion and new revenue?

New revenue comes from brand-new customers. Expansion revenue is additional income from existing ones.

What’s a good expansion revenue benchmark?

It varies by stage. In mid-market or enterprise SaaS, expansion often accounts for 30–50% of growth. Top-performing companies usually achieve 30%+ of total revenue from expansion.

Can expansion revenue hide churn problems?

Yes — if you’re expanding a small set of large accounts while losing many small ones, your NRR might still look good. That’s why it’s important to track both NRR and gross retention.

How can I increase expansion revenue?

Identify product-qualified leads, offer logical upgrade paths, personalize outreach based on usage, and time offers around value moments (like product milestones).