Downsell Contracted Monthly Recurring Revenue

What it measures

The sum of the monthly revenue lost during a period from existing contracted customers who downgrade their subscription tiers, remove paid add-ons, or move to cheaper plan variants. Only contracted (non-cancellable) revenue reductions count; a downgrade is the negative MRR delta when current MRR remains positive (customer stays paying, just at lower level). Downsell CMRR is reported as positive magnitude and flows into the contracted MRR waterfall as a subtraction.

Why it matters

You track Downsell CMRR because it reveals whether your existing contracted base is shrinking in value—separate from churn. Sales and product leaders use it to spot expansion problems hidden inside your 'active' customer base: if you're closing great new deals but watching existing customers trade down, that's a warning sign your product isn't delivering value or your pricing tiers don't match customer needs. CFOs and boards track it in the CMRR waterfall to understand net health—a company with high churn but zero downsells is different from one with low churn but rising downsells. Both are problems, but they demand different fixes. When you see downsells spike in a segment or cohort, that's your signal to investigate product adoption, pricing alignment, or whether tier design is driving customers to the wrong level.

How to read it

Downsell CMRR is reported as a positive number in your waterfall (like 'Lost $50K') but is subtracted from growth. Lower is better. Compare period-over-period: if downsells are rising, existing customers are contracting; if flat or falling, your product is retaining value. Always normalize downsells against Starting CMRR to see your 'gross contraction rate'—a $30K downsell on a $300K starting CMRR (10% gross contraction) is different from $30K on a $1M base (3% contraction). Segment downsells by cohort, product tier, and geography to find patterns. A spike in mid-market downgrades paired with flat enterprise downgrades tells you the mid-market product or pricing tiers need work. Track downsell CMRR alongside upsell CMRR: if upsells are rising and downsells flat, expansion is working; if downsells are rising while upsells stall, you have a retention headwind.

What good looks like

Watch-outs

• Counting a customer as both churned and downsell. If a contracted customer downgrades to $0 (or their contract is terminated), that's 100% churn, not partial downsell. Only downgrades where final MRR > $0 count.
• Including plan migrations at the same price as downsells. If a customer switches from 'Plan A' to 'Plan B' with identical monthly revenue, there's zero downsell. Only actual revenue reductions count.
• Ignoring the contracted boundary. Downsell CMRR applies only to contracted revenue (binding commitments). If you track subscription MRR separately, don't double-count downgrades across both pools.
• Not prorating mid-contract downgrades. If a customer downgrades effective the 15th of a month, prorate their revenue delta from day 15 onward. Unadjusted counts distort the monthly figure.

Worked example