Net Revenue Retention (NRR) measures the percentage of recurring revenue you keep from existing customers over a specific time period, including any upgrades, downgrades, and losses from customers who leave. NRR provides a clear picture of how well your business grows revenue from current customers without relying on new customer acquisition. The metric tells you whether your existing customers are finding enough value to not only stay but also spend more money with you.
For SaaS companies, NRR reveals the true health of your business model. A company with 110% NRR means that even if they never signed another new customer, their revenue would still grow by 10% from existing customers upgrading and expanding their usage. Strong NRR rates above 120% show that your product creates enough value for customers to increase their investment over time, making your business more predictable and sustainable.
Net Revenue Retention Formula Explained
The NRR formula is: (Starting MRR + Expansion MRR – Churn MRR) ÷ Starting MRR. This calculation gives you the percentage of revenue retained from your existing customer base.
- Starting MRR represents your monthly recurring revenue at the beginning of the measurement period.
- Expansion MRR includes additional revenue from upsells, cross-sells, and plan upgrades from existing customers.
- Churn MRR accounts for revenue lost when customers cancel subscriptions, downgrade plans, or reduce usage. This includes both complete cancellations and contraction MRR from downgrades.
Let's break down a practical NRR calculation:
| Component | Amount |
|---|---|
| Starting MRR | $50,000 |
| Expansion MRR | $8,000 |
| Churn MRR | $3,000 |
| NRR Result | 110% |
Your net dollar retention of 110% shows healthy growth from existing customers.
Comparing NRR to Gross Revenue Retention (GRR)
Gross revenue retention excludes expansion revenue from upgrades and add-ons, making it a more conservative measure of customer retention. GRR only measures how well you retain baseline revenue without accounting for account growth.
The key difference lies in expansion revenue treatment. NRR includes upsells and cross-sells, while GRR focuses purely on retention without growth factors. Both metrics provide valuable insights into different aspects of customer success.
NRR typically runs higher than GRR because it captures revenue expansion from satisfied customers. If your NRR is 120% but your GRR is 95%, you’re losing some baseline customers while successfully expanding others.
When to use each metric:
- Use NRR to measure overall revenue health and growth potential
- Use GRR to assess pure retention performance and identify churn issues
NRR Frequently Asked Questions
How is Net Revenue Retention calculated in businesses?
Net Revenue Retention measures how much recurring revenue you keep from existing customers over a set time period. The calculation includes all changes to customer accounts during that period.
You start with your beginning recurring revenue from existing customers. Then you add any expansion revenue from upgrades or increased usage.
Next, you subtract revenue lost from downgrades and customer churn. The final number shows whether you grew or lost revenue from your existing customer base.
Most SaaS companies calculate NRR using monthly recurring revenue as the foundation. This gives you a clear picture of how your current customers are contributing to growth.
What distinguishes Net Revenue Retention from Gross Revenue Retention?
Gross Revenue Retention only looks at how much base revenue you keep from existing customers. It does not include any expansion revenue from upsells or cross-sells.
Net Revenue Retention includes expansion revenue in its calculation. This makes it a more complete measure of how much value you extract from existing customers.
GRR typically ranges from 85-90% for healthy SaaS companies. NRR can exceed 100% when expansion revenue outpaces churn and downgrades.
GRR helps you spot retention problems. NRR shows whether your business is actually growing revenue from existing accounts.
Can you explain the Net Revenue Retention formula?
The Net Revenue Retention formula is: (Starting MRR + Expansion – Contractions – Churn) ÷ Starting MRR × 100.
Starting MRR is your monthly recurring revenue from existing customers at the beginning of the period. Expansion includes all upsells, cross-sells, and usage increases from those customers.
Contractions represent downgrades or reduced usage from existing customers. Churn is the revenue lost when customers cancel completely.
For example, if you start with $100,000 MRR, gain $20,000 in expansions, lose $5,000 to downgrades, and $10,000 to churn, your NRR would be 105%. This means you grew revenue from existing customers by 5%.
What would be considered a strong Net Revenue Retention rate?
A good Net Revenue Retention rate for SaaS companies is typically over 100%. This means you are growing revenue from existing customers even after accounting for churn.
Top-performing companies often achieve NRR rates of 120-140% or higher. These businesses excel at expanding existing accounts through upsells and cross-sells.
An NRR below 100% means you are losing more revenue to churn and downgrades than you gain from expansions. This indicates problems with customer satisfaction or product value.
Companies with NRR above 110% typically have strong product-market fit. They successfully increase customer spending over time through additional features or usage.
Does Net Revenue Retention factor in new sales from existing customers?
Yes, Net Revenue Retention includes all new sales to existing customers during the measurement period. This covers upsells, cross-sells, and any additional products or services.
When existing customers buy more seats, upgrade their plans, or add new features, this expansion revenue counts toward NRR. It shows how well you grow accounts over time.
However, NRR does not include revenue from brand new customers acquired during the period. The metric focuses only on how existing customer relationships change.
This approach helps you understand whether your current customers see increasing value in your product. Strong expansion revenue indicates good customer health and satisfaction.
