Net new MRR in any period combines four movements: new MRR from new logos, expansion MRR from existing customers, contraction MRR from downgrades, and churn MRR from cancellations. The relationship is \(\text{Net new MRR} = \text{New} + \text{Expansion} - \text{Contraction} - \text{Churn}\). Expansion revenue itself can come from upsells, cross-sells, seat expansion, or tier upgrades—each an "expansion vector." Contraction is the mirror image: revenue lost from existing customers via downgrades or seat reductions. Reactivation revenue, from previously churned customers who return, is sometimes tracked separately but contributes to growth nonetheless. Gross new ARR counts only new logos, while net new ARR includes gross plus expansion minus churn and contraction.
The Quick Ratio compresses these flows into a single efficiency measure: \((\text{New MRR} + \text{Expansion MRR}) / (\text{Churn MRR} + \text{Contraction MRR})\). A ratio above 4 is typically considered great, while above 2 is solid. Because the denominator isolates revenue lost from the existing base, the Quick Ratio answers a specific question: how efficiently is the company growing from what it already has, before considering new customer acquisition? This is why expansion matters more than new logos at scale: once the customer base is large, the existing base is the largest addressable source of net new ARR, and NDR compounds growth on autopilot.
The shape of expansion over a customer's lifetime produces distinctive retention patterns. A "smile" retention curve initially flattens or improves, then declines—common in products with seasonal or compounding usage. A smile-shaped NDR pattern dips early as customers churn or downgrade, then rises as surviving customers expand, producing a U- or smile-shape over time. Land-and-expand motions are designed to exploit this dynamic: sell a small initial footprint and grow the account over time through seat expansion, tier upgrades, or additional products. A multi-product land-and-expand extends the strategy across modules, increasing the surface area for expansion revenue while deepening customer dependency on the platform.