🎙️ Hey there, SaaSpreneurs!🎙️

💡 The short answer? Absolutely! When we look at our Monthly Recurring Revenue (MRR) schedules, price increases that lead to customers paying more in subsequent months will be reflected as expansion MRR. This rolls up into our overall revenue retention numbers, plain and simple.

📈 As I always say, "Aggregate revenue retention does not lie." Increased revenue shows up as expansion, and decreased revenue is contraction – it's that straightforward when it comes to reporting revenue retention metrics in aggregate.

But what about the impact on bookings when prices go up? 🤨 That's a bit more nuanced. To get the full scoop on how to properly handle price increases related to booking metrics, be sure to check out episode 28! 🎧

So, in a nutshell – for MRR schedules and revenue retention, price increases equal expansion. The math makes it so. ✅

You can also listen to this episode here.

📓Key Concepts to Learn💡

1️⃣ Price Increases as Expansion

• When a price increase occurs and customers pay more in the subsequent month, this additional revenue is considered ‘expansion Monthly Recurring Revenue (MRR).’ This means that increased pricing is categorized under ‘expansion’ in revenue retention schedules. The principle here is straightforward: if MRR goes up, it’s expansion; if it goes down, it’s contraction. 📈💰

2️⃣ Revenue Retention Schedules

• These schedules track the revenue retained from existing customers over a period. They don’t lie because they provide a formulaic way to measure changes in revenue. If there is an increase in MRR due to a price hike, it will be reflected as expansion in the MRR waterfall which feeds the retention schedules. Conversely, a decrease in MRR is tracked as contraction. 📊📝

3️⃣ Klaviyo's S-1 Filing

• Klaviyo published an S-1 document that provided insights into how price increases affected their retention metrics. It shows the real-world impact of pricing strategies on revenue and customer retention. 🏢📄

4️⃣ Implications for Bookings

• The impact of price increases on bookings is not as clear-cut as it is on MRR or ARR (Annual Recurring Revenue). For a more detailed understanding of how to handle price increases in the context of software bookings, episode 28 of the podcast offers more insights. 🎧

5️⃣ Differentiation Between Metrics

• Understanding the distinction between various metrics like expansion MRR, ARR, and bookings is crucial. Effectively tracking and categorizing these metrics helps in accurate financial analysis and strategic decision-making. 🔍💡

Each of these concepts helps a SaaS company analyze the financial and operational effects of price increases, offering a structured approach to revenue tracking and expansion strategy. 🚀

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If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge of essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,

Ben Murray
Host of SaaS Metric School

P.S. Don't forget to subscribe to our podcast and share it with your SaaS business buddies. Together, let's conquer the world of SaaS metrics!

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