S3-07 · Simulator · C4 Economics · SoftwareApplication

MRR Walk Simulator

The MRR walk is the only true identity in GTM: ΔC/Δt = a − δC + gC. New MRR = Starting MRR + New Business + Expansion − Contraction − Churned MRR. This simulator shows the identity in action over 12 months, highlights the compounding power of NRR, and includes a falsifiable Phi (PMF) check.

established identity All computation is client-side · Last updated 2026-06-18

The MRR walk identity

MRR Walk (continuous form) accounting identity

\frac{Δ C}{Δ t} = a - δ C + g C

Reads as: change in MRR per period = new business (a) minus churn (δ × C) plus expansion (g × C)

MRR Walk (discrete monthly form) accounting identity

M R R_{t + 1} = M R R_{t} + New - δ \cdot M R R_{t} + g \cdot M R R_{t}

Reads as: ending MRR = beginning MRR + new business + expansion MRR − churned MRR. The identity must balance.

Inputs

Starting MRR ($) New business MRR / month ($) Monthly churn rate (δ, %) Monthly expansion rate (g, %) PMF signal (Phi): 0.1–1.0 Phi = 0.70 · multiplier on new business conversion

12-month MRR walk

Month	Begin MRR	+ New (×Φ)	+ Expansion	− Churn	Net Δ	End MRR

Compounding effect: churn vs expansion

What happens if you move one lever by 1 percentage point? The table below compares your base case against reducing churn by 1% and increasing expansion by 1%.

Scenario	Month 12 MRR	vs Base	Implied NRR

Falsifiable Phi check

About the MRR walk and Phi

The MRR walk is the only accounting identity in GTM — it must balance by definition. Boards and investors use it to understand growth composition: is growth coming from new logos (acquisition-led) or expansion (retention-led)? Best-in-class SaaS companies reach net negative churn (expansion > churn), making NRR > 100% the most important single metric at scale.

Phi (Φ) is the PMF signal — a multiplier on conversion efficiency. Phi = 1.0 means every qualified lead converts at the structural rate. Phi < 0.5 means something is suppressing conversion: positioning friction, ICP mismatch, or switching-cost moats in the market. If Phi is low but MRR is growing, the growth may be coming from inertia or switching costs (T7 thesis), not genuine pull.

See: NRR metric · GRR metric · CAC Payback calculator