Recurring Revenue: How to Grow It Without Growing Your Traffic

The default playbook for growing a subscription business goes like this: spend more on ads, write more content, get more traffic, convert more signups. If revenue isn't growing fast enough, pour more into the top of the funnel.

It's not wrong. But it's the most expensive way to grow.

Customer acquisition costs have risen roughly 60% in recent years. Every new subscriber costs more to get than the last. And if your monetization isn't dialed in — if your pricing is stale, your packaging doesn't convert, your churn is leaking subscribers — then more traffic just means more people entering a broken system.

When I ran growth at Codecademy, we grew from $10M to $50M in ARR. The assumption people make is that we got a lot more traffic. We didn't. Not meaningfully. Codecademy already had massive awareness — millions of people had heard of it, used the free product, knew the brand.

The problem wasn't at the top of the funnel. It was everything after.

Pricing hadn't been revisited in a long time. Packaging didn't map to how different users actually used the product. Free-to-paid conversion had room to grow. Churn was higher than it needed to be. There was almost no expansion revenue.

We fixed those things. Revenue grew 5x. Traffic didn't.

This article is about how to do the same thing — grow your recurring revenue by making more from what you already have.

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What Is Recurring Revenue?

Quick definitions so we're speaking the same language:

Monthly Recurring Revenue (MRR) is the predictable revenue your subscription business earns each month. Only recurring charges count — not one-time fees, setup costs, or professional services.

MRR = Number of Active Subscribers × Average Revenue Per Subscriber

Annual Recurring Revenue (ARR) is MRR × 12. It's the annualized view of the same number.

Both metrics only count revenue you can expect to receive again next period. That predictability is the entire value of a subscription model — it's why subscription businesses command higher valuations than one-time-purchase businesses.

The Components of MRR

Your total MRR isn't one number. It's the sum of several:

Net New MRR = New MRR + Expansion MRR − Churned MRR − Contraction MRR

Where:

• New MRR = Revenue from brand-new subscribers
• Expansion MRR = Additional revenue from existing subscribers (upgrades, add-ons, increased usage)
• Churned MRR = Revenue lost from subscribers who cancelled
• Contraction MRR = Revenue lost from subscribers who downgraded

Most operators fixate on New MRR. That's the acquisition number. But the other three components — expansion, churn, and contraction — often have more impact on growth than new subscribers do.

Here's a number that should change how you think about this: subscription businesses now generate 30-40% of their growth from existing customers rather than new acquisitions. At the $1M+ ARR mark, expansion revenue accounts for about 40% of new ARR.

If you're only working on acquisition, you're ignoring almost half your growth potential.

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The Six Levers of Recurring Revenue Growth

There are exactly six ways to grow MRR. Only the first one requires more traffic.

Lever 1: Acquire More Subscribers

This is the obvious one. More customers = more MRR. It's also the most expensive and the most competitive.

I'm not going to dwell on this because every other marketing blog on the internet covers it. The interesting stuff — and the stuff with higher ROI — is in the next five.

Lever 2: Increase Price

The fastest, cheapest, and most underused lever.

A 15% price increase applied to new subscribers doesn't require more traffic, more features, or more engineering resources. It increases MRR directly and compounds over the subscriber's entire lifetime.

Most subscription businesses are undercharging. I covered the full process for finding and setting the right price — including how to research willingness to pay and how to test increases safely — in my value-based pricing guide.

The short version: if you haven't revisited pricing in the last year, you're almost certainly leaving money on the table. Grandfather existing subscribers at their current rate, test a higher price on new signups, and measure the net revenue impact.

Lever 3: Improve Packaging

Packaging is how you structure your plans — what goes in each tier, how many tiers you offer, what value metric you charge on.

Bad packaging forces customers into plans that don't fit. They either end up on a plan that's too cheap for the value they get (you leave money on the table) or a plan that's too expensive for their needs (they churn).

Good packaging feels obvious to the customer. "That plan is clearly for me."

Signs your packaging is leaking revenue:

• Most subscribers are on your cheapest plan (your tiers aren't giving them a reason to upgrade)
• Significant downgrade volume (customers are paying for more than they need)
• High early churn (customers feel the product doesn't match what they signed up for)
• No one chooses the middle tier (it's not differentiated enough from the other options)

The fixes:

• 2-4 clearly differentiated tiers, each designed for a specific customer type
• A value metric that scales with usage or success (not arbitrary feature bundles)
• A highlighted "recommended" plan that anchors the decision
• A clear upgrade path — as the customer's needs grow, the next tier up should feel like the natural step

Packaging changes are free. No ad spend. No engineering. Just restructuring how you present what you already sell. And the impact on MRR can be dramatic.

Lever 4: Reduce Churn

Every subscriber who cancels is recurring revenue you earned and lost. Reducing churn extends the average customer lifetime, which directly increases what each subscriber is worth.

The math: reducing monthly churn from 5% to 3% increases average customer lifetime from 20 months to 33 months. That's 65% more revenue from every subscriber — without acquiring a single new one.

I wrote a complete guide on fixing churn, but the highest-leverage moves are:

For involuntary churn (20-40% of all churn):

• Enable Stripe Smart Retries (ML-driven payment recovery)
• Build a 3-4 email dunning sequence for failed payments
• Send card expiration reminders before failures happen
• Set grace periods on App Store and Google Play

For voluntary churn:

• Add a cancellation flow with pause and downgrade options
• Survey every cancelling subscriber (one question: why are you leaving?)
• Find and fix your #1 cancellation reason
• Turn off monthly payment receipt emails (they prompt cancellation reviews)

Start with involuntary churn. It's the highest ROI — low effort, immediate results.

Lever 5: Grow Expansion Revenue

Expansion revenue is the most powerful growth lever that most subscription businesses barely use.

When an existing subscriber upgrades their plan, buys an add-on, adds more seats, or increases usage — that's expansion MRR. It grows revenue without any acquisition cost.

The best subscription businesses don't just retain subscribers. They make subscribers worth more over time. That's what net revenue retention measures — and it's why companies with NRR above 110% grow 2.5x faster than those below.

How to build expansion revenue:

Usage-based triggers: When a subscriber approaches their plan limit — 80% of storage, seats, projects, API calls — that's the moment to surface an upgrade. Not in a monthly email. At the point of friction.

Tiered plans with a clear upgrade path: Each tier should represent a natural progression. As the customer's needs grow, the next tier should feel like the obvious choice — not a confusing decision.

Add-ons for power users: Features or services that go beyond the core product. Additional storage, premium support, advanced analytics, API access. These let high-value customers spend more without forcing everyone onto an expensive plan.

Annual plan upgrades: Monthly subscribers who've been active for 3+ months have proven they find value. Offer them a switch to annual at a discount. You lock in 12 months of revenue and reduce churn decision points from twelve to one.

Lever 6: Improve Free-to-Paid Conversion

If you have a free tier or free trial, the conversion rate from free to paid is a direct MRR lever. A 1-percentage-point improvement here — from 3% to 4%, say — is a 33% increase in new paying subscribers from the same traffic.

The benchmarks:

• B2B SaaS free trial conversion: 15-25%
• B2B SaaS freemium conversion: 5-10%
• B2C / consumer freemium conversion: 2-5%

What actually moves this number:

Faster time to value. New users need to experience the core product value in their first session — not after days of setup. At Codecademy, users who completed their first lesson within 24 hours were dramatically more likely to convert to paid. We restructured onboarding entirely around that insight.

Upgrade prompts at moments of value. Don't prompt upgrades on a timer or at random. Prompt when the user just experienced something valuable and hits a free-tier limit. "You just created your 5th project — upgrade to create unlimited."

Understand why free users don't convert. Survey a sample. The reasons will be specific: "I only need the basic features," "It's too expensive for personal use," "I don't use it enough to justify paying." Each reason has a different fix.

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The MRR Growth Framework

Here's how I think about prioritizing these levers for any subscription business:

Stage 1: Plug the Leaks (Months 1-2)

Before you try to grow, stop the bleeding.

• Fix involuntary churn (Smart Retries, dunning emails, card expiration reminders)
• Add a cancellation flow with pause and downgrade options
• Survey cancelling subscribers to find your #1 reason

Why first: Every new subscriber you acquire is worth more when fewer existing subscribers are leaving. Retention improvements compound forward across all future cohorts.

Stage 2: Optimize What You Have (Months 2-4)

Now make each subscriber worth more.

• Review pricing — run a willingness-to-pay survey, test an increase on new subscribers
• Review packaging — are tiers clear, differentiated, with a natural upgrade path?
• If you have a free tier, audit time-to-value and upgrade triggers

Why second: These changes are free (no ad spend) and apply to every subscriber going forward. A 15% price increase plus a 2-point churn reduction can increase MRR more than doubling acquisition spend.

Stage 3: Build the Expansion Engine (Months 4-6)

Turn your existing subscriber base into a growth engine.

• Build expansion paths (usage triggers, add-ons, tier upgrades)
• Target annual plan conversions for proven monthly subscribers
• Track net revenue retention as your north star

Why third: Expansion revenue takes longer to build because it requires product and packaging work. But once it's running, it compounds — subscribers becoming more valuable over time means every month's base revenue is higher than the last.

Stage 4: Scale Acquisition (Ongoing)

Now — with churn plugged, pricing optimized, and expansion running — pour fuel on acquisition. Every new subscriber enters a system that retains them longer, charges them fairly, and grows their value over time.

This is the order most subscription businesses should follow. But almost all of them start at Stage 4 and never get to the first three.

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MRR Calculator

Monthly Recurring Revenue

MRR = Active Subscribers × Average Revenue Per Subscriber

Example: 1,000 subscribers × $50/mo = $50,000 MRR

Annual Recurring Revenue

ARR = MRR × 12

Example: $50,000 × 12 = $600,000 ARR

Net New MRR

Net New MRR = New MRR + Expansion MRR − Churned MRR − Contraction MRR

Example: $8,000 new + $3,000 expansion − $2,500 churn − $500 contraction = $8,000 net new

MRR Growth Rate

MRR Growth Rate = Net New MRR ÷ Starting MRR × 100

Example: $8,000 ÷ $50,000 = 16% monthly growth

Expansion MRR Rate

Expansion Rate = Expansion MRR ÷ Starting MRR × 100

Example: $3,000 ÷ $50,000 = 6% expansion rate

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FAQ

What counts as recurring revenue?

Only revenue from ongoing subscriptions. Monthly or annual plan charges count. One-time setup fees, professional services, consulting engagements, and hardware sales don't. The distinction matters because investors and acquirers value recurring revenue at a premium — it's predictable.

What's the difference between MRR and ARR?

ARR is MRR multiplied by 12. MRR is more granular — useful for tracking month-to-month changes. ARR gives the big-picture annual view. Most businesses track MRR operationally and report ARR for benchmarking and fundraising.

How fast should MRR be growing?

It depends on your stage. Early-stage subscription businesses (under $1M ARR) often grow 10-20% month-over-month. At $1M-$10M ARR, 5-10% monthly growth is strong. Above $10M, 3-5% monthly (which is still 40-80% annually) is solid. The key is whether growth is sustainable and capital-efficient — not just fast.

What percentage of MRR growth should come from expansion?

At the $1M+ ARR mark, about 30-40% of new ARR coming from expansion is now the norm for well-run subscription businesses. If expansion is less than 20% of your growth, you're over-relying on new customer acquisition — which is the most expensive and least sustainable growth source.

Is it really possible to grow without more traffic?

Yes. Pricing increases, churn reduction, packaging improvements, and expansion revenue all grow MRR without a single additional visitor. A 15% price increase on new subscribers + a 2-point churn reduction + moderate expansion revenue can grow MRR 30-50% with zero change in traffic. I've seen it — and done it — multiple times.

What's a good MRR churn rate?

For B2B SaaS, aim for under 2% monthly gross MRR churn. For B2C subscriptions, under 5% is solid. More important than the absolute number is the trend — is it improving? And track it split between involuntary and voluntary, because the fixes are completely different. See my churn rate guide for details.

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What to Do Next

If you've been focused entirely on acquisition, take a step back and look at the full picture. How much revenue are you leaking to churn? Is your pricing reflecting the value you deliver? Do your subscribers have a path to spend more as their needs grow?

I built a free self-assessment that helps you answer exactly these questions — across pricing, packaging, conversion, checkout, retention, and expansion.

Take the Subscription Revenue Leak Audit →

52 checklist items across 8 revenue leak categories. Takes 10 minutes. Most businesses that go through it find they're leaving 15-30% of potential revenue on the table — and the fixes don't require more traffic.