How is expansion ARR rate calculated?

How is expansion ARR rate calculated?

• A. Expansion ARR divided by starting ARR (or by the existing customer base) as a percentage
• B. Expansion ARR divided by total ARR
• C. Expansion ARR divided by ending ARR
• D. Expansion ARR times starting ARR

Answer: (A)

Expansion ARR rate shows how much revenue growth came from existing customers during a period. It’s calculated by taking the additional ARR from expansions (Expansion ARR) and dividing it by the ARR you started with at the beginning of the period (Starting ARR), then expressing that as a percentage. This denominator reflects the size of the base you’re expanding, so the result tells you what fraction of your starting base grew through upsells or expansions. For example, starting ARR of $1,000,000 with $200,000 in Expansion ARR yields a 20% expansion rate. This isolates expansion activity from new bookings or churn, which would distort the measure if you used ending ARR or total ARR as the denominator. Some teams also report expansion per customer by dividing Expansion ARR by the number of existing customers, but the standard practice is Expansion ARR divided by Starting ARR.

Expansion ARR rate shows how much revenue growth came from existing customers during a period. It’s calculated by taking the additional ARR from expansions (Expansion ARR) and dividing it by the ARR you started with at the beginning of the period (Starting ARR), then expressing that as a percentage. This denominator reflects the size of the base you’re expanding, so the result tells you what fraction of your starting base grew through upsells or expansions. For example, starting ARR of $1,000,000 with $200,000 in Expansion ARR yields a 20% expansion rate. This isolates expansion activity from new bookings or churn, which would distort the measure if you used ending ARR or total ARR as the denominator. Some teams also report expansion per customer by dividing Expansion ARR by the number of existing customers, but the standard practice is Expansion ARR divided by Starting ARR.