A rising MRR line is the most persuasive chart in any deal, and it is also the most compatible with bad news. Net growth is the sum of four movements, and new-customer revenue can cover an arbitrarily high churn rate for as long as acquisition holds. What you are buying is the retained base; what the chart shows is the base plus the sales engine.
TL;DR: Monotonic MRR growth is compatible with deteriorating retention, because new sales can mask any churn rate. Here is how to decompose the growth into its four components.
Sellers show the net line because it is the line they run the business on, and because it is genuinely the right summary for an operator. For a buyer it is the wrong altitude: you are acquiring the installed base and inheriting a sales motion whose future you cannot observe. The decomposition is not something sellers withhold, it is something most billing dashboards simply do not display.
Four mechanisms account for most of the gap between this claim and what the raw rows show. They are not mutually exclusive and they compound.
If new revenue grows faster than churned revenue, the net line rises while retention deteriorates. Plot churned MRR as a percentage of opening MRR by month. A rising series inside a rising net line is the finding.
Separate rate from quantity. Revenue per account rising while account count is flat means the growth came from pricing, which is finite and usually followed by elevated churn at the next renewals.
If most new revenue arrives from one channel, the growth line is a bet on that channel persisting under new ownership. Directory rankings, integration marketplace placement and a founder's personal audience are all channels that do not transfer cleanly.
Twenty-four months of growth can contain six months of stagnation and still be described accurately as growth. Look at the last two quarters on their own, and at month-over-month growth rate rather than level.
Every step below runs on a subscription-level export in a spreadsheet. None of it needs access to the seller's live billing account, which matters, because as a buyer you will not get one.
These are the thresholds we use in our own reports. They are working thresholds rather than industry standards, and the right line for a given deal depends on contract length, tenure and how transferable the customer relationships are.
| What you find | Verdict | What to do about it |
|---|---|---|
| Churn as a share of opening MRR is flat or falling across 24 months | Green | The growth is coming from a base that also holds. This is the case the chart implies. |
| Churn share rising while net MRR rises | Price it in | Acquisition is outrunning a worsening leak. Model what the line does if new sales fall 30% post-transition. |
| Account count flat, revenue per account rising | Investigate | Growth is pricing. Ask for the pricing-change history and check churn in the following two renewal cycles. |
| Quick ratio below 2 in recent months | Investigate | Each dollar of growth is costing close to a dollar of loss. Efficiency is deteriorating even if the level is rising. |
| More than 60% of new revenue from one channel | Investigate | The growth line is a bet on that channel surviving the ownership change. Establish whether it transfers. |
Ask for these before the LOI. After the LOI you are renegotiating rather than negotiating, and a seller who will not produce subscription-level rows has told you something useful either way.
Illustrative. MRR rises from $40,000 to $70,000 over twenty-four months with no down month, which the chart shows clearly. Decomposed, churned MRR grows from 2.1% to 5.8% of opening MRR over the same period, while new MRR grows from 4.0% to 8.2%. The net line is monotonic because the sales engine accelerated faster than the leak widened. Underwrite the sales engine at its current rate and the model works; assume it falls by a third during the ownership transition, which is a common outcome when a founder-led channel changes hands, and MRR declines from month two. The chart was accurate and it was the wrong chart.
This is the most consequential decomposition in buyer-side diligence, because a monotonic MRR line does more to justify a multiple than any other artifact and it constrains retention not at all. Underwrite the retained base and treat the sales engine as a separate asset with its own transfer risk. If the growth depends on a founder's audience or one channel placement, that dependency belongs in the structure — an earn-out, a transition services agreement, or a lower multiple.
The relevant tool on this site is the MRR trajectory forensics, which runs the arithmetic above on a file you paste in. The full method is documented in the 5-risk buyer-side method and the due-diligence checklist.
Every check on this page can be run by hand in a spreadsheet, and if you have the time you should. If you would rather not: send us the target's subscription export and we run the full human-reviewed analysis — logo churn, revenue churn, customer concentration, annual-plan decay, zombie MRR and an A–F revenue-quality grade. The free Starter tier covers one CSV per month, which is enough to check a single deal.
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Yes, and it is common. Net MRR change is new plus expansion minus contraction minus churn. As long as new revenue grows faster than churned revenue, the net line rises no matter what retention does. That is why the decomposition matters more than the level.
It is new plus expansion revenue divided by churn plus contraction revenue. It measures how many dollars of growth the business manufactures per dollar it loses. A high level with a falling quick ratio means the business is working harder every month to keep the line rising, which is exactly the trend a new owner inherits.
For each month, sum the normalised monthly amount of every subscription active in that month, treating annual plans as their annual price divided by twelve. Do it for twenty-four months and compare your series to the seller's chart. A gap between the two is itself a finding worth resolving before you look at anything else.