"MRR went up $4,000 this month" sounds like good news until you realize it could mean you added $20,000 in new customers while losing $16,000 to churn - or it could mean churn was nearly flat and new business drove almost all of it. Both produce the same net number. A waterfall chart is what separates them.
This post explains what an MRR (or ARR) waterfall chart is, how to read one, and why it's one of the most useful single charts in SaaS reporting.
What Is an MRR Waterfall Chart?
An MRR waterfall chart (also called a bridge chart) breaks the change in total MRR over a period into its component movements, shown as a sequence of bars stepping from the starting MRR to the ending MRR.
Ending MRR = Starting MRR + New MRR + Expansion MRR + Reactivation MRR − Contraction MRR − Churned MRR
🧒 Explained simply Imagine your lemonade stand made $500 last month and $560 this month. Just looking at "$500 to $560" tells you almost nothing about what happened. A waterfall chart breaks it open: you gained $90 from new customers, $20 from existing customers buying more, lost $30 to people who stopped buying as much, and lost $20 to customers who quit entirely. Each of those steps is its own bar, stacking up from $500 to land exactly on $560.
The Five Components of the Waterfall
| Component | What It Represents | Direction |
|---|---|---|
| New MRR | Revenue from brand-new customers | Up |
| Expansion MRR | Upgrades, seat additions, add-ons from existing customers | Up |
| Reactivation MRR | Revenue from previously churned customers who came back | Up |
| Contraction MRR | Downgrades from existing customers | Down |
| Churned MRR | Revenue lost to full cancellations | Down |
Each bar in the chart represents one of these five movements for the period, starting from the prior period's ending MRR and walking forward to the new total.
How to Read a Waterfall Chart
A waterfall chart typically renders as: a starting bar, then a sequence of up or down bars for each component, ending in a final bar that matches the actual ending MRR. Reading it well means looking past the ending number to the shape of the bars themselves.
A tall New MRR bar next to a tall Churned MRR bar tells you growth is being driven almost entirely by new acquisition, with retention doing little to help - a fragile growth pattern even if the net number looks healthy.
A small New MRR bar next to a tall Expansion MRR bar tells you growth is coming from your existing base getting more valuable - generally the most capital-efficient and durable growth pattern.
A Contraction or Churned bar that's growing faster than New or Expansion is the earliest visual warning sign that net MRR growth is about to slow or reverse, often weeks before the topline number reflects it.
Worked Example
Starting MRR for the month: $80,000.
| Component | Amount |
|---|---|
| Starting MRR | $80,000 |
| + New MRR | $9,000 |
| + Expansion MRR | $3,200 |
| + Reactivation MRR | $600 |
| − Contraction MRR | $1,800 |
| − Churned MRR | $6,500 |
| Ending MRR | $84,500 |
Net MRR growth here is $4,500, or 5.6% - which sounds solid on its own. But the waterfall shows that $6,500 in Churned MRR is larger than the $9,000 in New MRR is comfortably covering, and nearly double the $3,200 in Expansion MRR. If Churned MRR keeps growing at this pace relative to New MRR, the net growth rate will compress even if gross new business stays flat.
Why a Single MRR Number Hides This
Two businesses can post identical $4,500 net MRR growth for a month with completely different underlying realities:
| Business A | Business B | |
|---|---|---|
| New MRR | $9,000 | $4,500 |
| Expansion MRR | $3,200 | $3,000 |
| Reactivation MRR | $600 | $500 |
| Contraction MRR | $1,800 | $1,000 |
| Churned MRR | $6,500 | $2,500 |
| Net MRR Growth | $4,500 | $4,500 |
Business A is growing on the back of heavy new acquisition while bleeding churn. Business B is growing more slowly on the gross side but retaining far better, with much lower churn relative to its size. The net number is identical; the businesses are not. A waterfall chart is the fastest way to tell them apart.
Common Waterfall Chart Mistakes
Looking only at the ending bar. The whole value of the chart is in comparing the relative size of the component bars, not just confirming the math adds up to the right total.
Comparing waterfalls across periods of different lengths. A quarterly waterfall and a monthly waterfall aren't directly comparable - normalize to the same period length before drawing conclusions about trend.
Ignoring Contraction MRR as a separate line. Some simplified waterfalls fold contraction into churn. Keeping them separate matters, since a rising contraction bar with flat churn points to a downgrade problem distinct from a cancellation problem - see logo churn vs revenue churn for why that distinction matters.
How to Build an MRR Waterfall in Chartsy
Chartsy generates MRR waterfall charts directly from your Stripe or Paddle subscription data, automatically separating new, expansion, reactivation, contraction, and churned MRR for any period. You can ask:
- "Show me an MRR waterfall for last month"
- "Break down my MRR growth into new, expansion, and churned revenue"
- "Compare my MRR waterfall this quarter vs last quarter"
- "Which component is driving most of my MRR growth right now?"
Connect Stripe and see your MRR waterfall →
Frequently Asked Questions About MRR Waterfall Charts
What is an MRR waterfall chart? An MRR waterfall (or bridge) chart visualizes how total MRR changed over a period by breaking the change into five components: new, expansion, reactivation, contraction, and churned MRR. Each component is shown as a bar that steps from the starting MRR to the ending MRR, making the drivers of growth or decline visible at a glance.
Why not just look at total MRR growth? Because two businesses can show identical net MRR growth with very different underlying dynamics - one driven by heavy new acquisition offsetting high churn, another by modest new business and strong retention. The net number alone can't distinguish fragile growth from durable growth; the waterfall can.
What's the difference between contraction MRR and churned MRR? Contraction MRR is revenue lost when an existing customer downgrades but stays subscribed. Churned MRR is revenue lost when a customer cancels entirely. Keeping them separate in a waterfall chart matters because a downgrade problem and a cancellation problem usually have different root causes and different fixes.
How often should I review my MRR waterfall? Monthly is the standard cadence for most SaaS businesses, since it aligns with how MRR itself is tracked. Reviewing quarterly waterfalls alongside monthly ones can help separate short-term noise from a real trend in any one component.
What does a healthy MRR waterfall look like? A healthy waterfall shows Expansion and New MRR bars that are large relative to Churned and Contraction MRR bars, with Churned MRR shrinking or holding flat as a share of starting MRR over time. The strongest pattern - net negative churn - is when Expansion and Reactivation MRR alone outweigh Churned and Contraction MRR combined.
Related: What Is MRR? · What Is Expansion MRR? · Logo Churn vs Revenue Churn
Written by
Chartsy TeamThe Chartsy Team writes guides, product updates, and resources to help SaaS and eCommerce founders make sense of their metrics, without SQL or spreadsheets.
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