Expansion Revenue

Expansion Revenue is additional recurring revenue generated from existing customers through upgrades, add-ons, seat increases, and cross-selling. It represents organic growth within the current customer base and is a key driver of Net Revenue Retention (NRR) above 100%. Expansion revenue is more profitable than new customer acquisition and indicates strong product-market fit.

Expansion Revenue is calculated using the formula:

Expansion Revenue = New MRR from existing customers - Starting MRR from those customers

For example, if a customer upgrades from a $100/month plan to a $200/month plan, that generates $100 in expansion revenue.

Expansion revenue sources include:

• Upgrades: Customers moving to higher-tier plans
• Add-ons: Additional features, modules, or services
• Seat expansion: More users or licenses within the same company
• Cross-selling: Additional products from the same vendor
• Usage increases: Higher consumption of metered services

Industry benchmarks for expansion revenue vary significantly:

• B2B SaaS: 15-30% of total MRR growth typically comes from expansion
• Enterprise software: 20-40% expansion rates are common
• B2C SaaS: 5-15% expansion rates are typical
• E-commerce subscriptions: 10-25% expansion through add-ons

For SaaS businesses, expansion revenue is often the most profitable growth channel, as it requires no customer acquisition costs and leverages existing customer relationships and trust.