How to build an MRR waterfall chart
An MRR line chart tells you whether revenue went up. An MRR waterfall tells you why, which is the only version that helps you do anything about it.
Six columns, always the same order
Opening MRR, new, expansion, contraction, churn, closing MRR. Keeping the order fixed month to month means the shape itself becomes recognisable and people spot anomalies without reading labels.
Never net the middle
Reporting a single net change of +4k destroys the information. Twenty thousand of new business against sixteen thousand of churn is a very different company from five thousand against one thousand, and both net to the same number.
Expansion and contraction are not the same as new and churn
Expansion is existing customers paying more; contraction is existing customers paying less without leaving. Folding them into new and churn is the most common way this chart gets built wrong, and it hides your best growth lever.
Colour and totals
Opening and closing columns in a neutral tone since they are levels, not movements. Green for new and expansion, red for contraction and churn. Label each column with its value; the reader should never have to measure a bar against an axis.
Build your MRR waterfall →Once the layout is fixed, this chart takes two minutes a month and answers most of what a board meeting is going to ask.
Frequently asked
What goes into an MRR waterfall?
Opening MRR, new business, expansion, contraction, churn and closing MRR. The four middle columns must sum to the difference between the two totals.
Should downgrades count as churn?
No. A customer paying less is contraction; a customer leaving is churn. Merging them hides whether you have a pricing problem or a retention problem.