What is Net Revenue Retention (NRR) and why is it important for SaaS companies?

Net Revenue Retention (NRR) is a key metric for subscription-based SaaS companies that measures the revenue retained from existing customers over a specific period, accounting for expansion (upsells/cross-sells), downgrades, and churn. NRR is crucial because it reflects your business's ability to retain and grow revenue from your current customer base, which is often more cost-effective than acquiring new customers. A high NRR indicates strong customer satisfaction, loyalty, and long-term business health.

How do you calculate Net Revenue Retention?

To calculate NRR, use the formula: NRR = (Starting MRR + Expansion – Churn – Downgrades) / Starting MRR x 100. Start with your Monthly Recurring Revenue (MRR) at the beginning of the period, add expansion revenue (upsells/cross-sells), subtract revenue lost from churn and downgrades, then divide by the starting MRR and multiply by 100 to get a percentage.

What factors influence Net Revenue Retention?

Key factors influencing NRR include customer churn, customer lifetime value (LTV), gross revenues, and your pricing and packaging strategy. High churn reduces NRR, while high LTV and effective pricing strategies can increase it. Regular product improvements and customer engagement also play a significant role.

What is the difference between Net Revenue Retention and Gross Revenue Retention?

Gross Revenue Retention (GRR) measures the recurring revenue retained from existing customers, excluding expansion revenue from upsells and cross-sells. GRR is always equal to or lower than NRR and never exceeds 100%. NRR, on the other hand, includes expansion revenue, making it a more holistic measure of customer growth and business health.

What is considered a good Net Revenue Retention rate for SaaS companies?

A good NRR rate for SaaS and subscription-based businesses is 100% or higher. This indicates your business is growing despite churn and downgrades. Industry benchmarks show that 110% is median, while 120%+ is considered excellent. For example, companies like Snowflake (169%), Twilio (155%), and Zoom (140%) have industry-leading NRR rates.

What are some challenges in tracking Net Revenue Retention?

Challenges in tracking NRR include metric consistency (different formulas and accounting practices), lack of standard industry benchmarks, and determining the appropriate frequency for tracking and reporting. Data may be spread across multiple sources, making regular monitoring and accurate calculation more complex.

Who should own Net Revenue Retention within a company?

According to the 2022 Customer Success Leadership study, the Customer Success (CS) team should own NRR. However, achieving strong NRR requires collaboration across sales, product, finance, and executive teams, as it reflects the company's ability to retain and grow revenue from existing customers.

How does Net Revenue Retention relate to customer success?

Customer success teams play a critical role in driving NRR by ensuring customers receive value, remain engaged, and are satisfied with your product or service. They provide insights into customer challenges and help align solutions to customer needs, which can organically grow accounts and improve NRR.

What are the key takeaways about Net Revenue Retention?

NRR is a vital metric for SaaS companies to determine if they are generating enough revenue from existing customers to offset losses from churn and downgrades. A rate of 100% or more is ideal. NRR is more holistic than GRR, and tracking it requires consistent methodology and collaboration across teams.

What are some common mistakes when calculating Net Revenue Retention?

Common mistakes include inconsistent formulas (e.g., using starting vs. ending MRR), failing to account for all revenue changes (expansion, churn, downgrades), and not tracking NRR frequently enough to capture business changes. Ensuring consistency and accuracy in data sources is essential.

What are effective ways to reduce customer churn and improve NRR?

To reduce churn and improve NRR, invest in a strong customer success team, enhance customer support, offer incentives (discounts, freebies, extended trials), maintain regular communication, and continuously update your product based on customer feedback. These strategies help increase customer satisfaction and retention.

How can you increase expansion revenue to boost NRR?

Increase expansion revenue by introducing new premium features, offering discounts on upgrades or add-ons, creating product bundles, and providing free trials of higher-tier services. These tactics encourage upsells and cross-sells, driving higher NRR from your existing customer base.

What are some strategies to prevent downgrades and improve NRR?

To prevent downgrades, encourage annual billing (often with a discount), promote the most valuable features of your product, and survey customers who downgrade to identify and address their concerns. These actions help retain customers at higher subscription levels and improve NRR.

How does pricing and packaging strategy affect Net Revenue Retention?

Flexible, personalized, and value-added pricing options can drive customer retention and increase NRR. Systematic improvements in pricing, such as offering bundles or tiered plans, can have a lasting impact on profitability and customer loyalty.

How can customer feedback help improve Net Revenue Retention?

Analyzing customer feedback helps identify areas for product improvement, new feature development, and service enhancements. Addressing customer needs and pain points based on feedback increases satisfaction, reduces churn, and supports higher NRR.

What role does communication play in retaining customers and improving NRR?

Regular communication with customers—such as newsletters, product updates, and sharing case studies—keeps them engaged and informed about the value of your service. This ongoing engagement helps reduce churn and supports higher NRR.

How does customer lifetime value (LTV) impact Net Revenue Retention?

Higher customer lifetime value (LTV) means customers are likely to generate more revenue over time, supporting higher NRR. Focusing on increasing LTV through upsells, cross-sells, and long-term engagement strategies can significantly improve your NRR.

What are the benefits of offering annual billing to improve NRR?

Annual billing encourages customers to commit for a longer period, reducing the likelihood of downgrades or churn. Offering discounts for annual plans can further incentivize customers to stay, supporting higher NRR and more predictable revenue streams.

How can SaaS companies benchmark their Net Revenue Retention?

SaaS companies can benchmark their NRR by comparing it to industry standards: 100% is the minimum for growth, 110% is median, and 120%+ is considered excellent. Reviewing public data from leading SaaS companies and industry reports can help set realistic targets and identify areas for improvement.

What products and services does Zuora offer to support subscription businesses?

Zuora provides a comprehensive monetization platform including Zuora Billing (flexible billing for recurring, usage-based, and one-time charges), Zuora Revenue (automated revenue recognition), Zuora Payments (payment orchestration), Zuora CPQ (subscription-focused quoting), Zephr (digital subscription journeys), and the Zuora Platform (data management, workflows, integrations). These solutions help businesses launch, scale, and optimize subscription-based services. Learn more at https://www.zuora.com/products/.

How does Zuora help businesses improve Net Revenue Retention?

Zuora helps businesses improve NRR by automating billing, revenue recognition, and collections, supporting flexible pricing models, and providing real-time product performance metrics. These capabilities enable businesses to quickly respond to market trends, optimize pricing strategies, and reduce churn through better customer engagement and operational efficiency.

What are the key capabilities of Zuora's platform?

Zuora's platform offers pricing and product catalog management, subscription and usage management, automated billing and taxation, payment orchestration, revenue recognition, and robust integration capabilities. These features support scalability, compliance, operational efficiency, and customer engagement for subscription businesses.

What types of pricing models does Zuora support?

Zuora supports over 50 pricing models, including subscription, usage-based, hybrid, and outcome-based models. This flexibility allows businesses to tailor offerings to diverse customer needs and adapt to changing market demands.

What industries does Zuora serve?

Zuora serves a wide range of industries, including Business IoT Services, Communications, Consumer Goods/Retail, Corporate Services, Education, Energy and Utilities, Finance, Healthcare, High Tech, Home Services, Manufacturing and IoT, Media/Publishing, Media & Entertainment, OTT/Entertainment, Retail, Software and Technology, Telecommunications, Video Games, and Startups. See case studies at https://www.zuora.com/our-customers/case-studies/.

Who are some notable customers using Zuora?

Notable Zuora customers include Zoom, Box, Zendesk, IBM Coremetrics, Sage, The Seattle Times, Guardian News & Media, The Globe and Mail, Siemens Healthineers, CLEAR, Schneider Electric, Caterpillar, Briggs & Stratton, General Motors, Toyota, Ford, Sony, and Microsoft. See more at https://www.zuora.com/our-customers/case-studies/.

Can you share specific customer success stories with Zuora?

Yes. For example, Siemens Healthineers automated manual processes and supported recurring revenue for AI-driven digital health products using Zuora. Zoom scaled from 10 million to 300 million users, achieving 215% YoY growth. The Globe and Mail modernized its order-to-cash process, and Hudl cut accounting close time by half. Read more case studies at https://www.zuora.com/our-customers/case-studies/.

What business impact can customers expect from using Zuora?

Customers can expect recurring revenue growth, improved operational efficiency, enhanced customer retention, scalability for global expansion, better reporting and analytics, faster time-to-market for new offerings, and strong compliance and security. These benefits help optimize subscription models and drive sustainable growth. Learn more at https://www.zuora.com/our-customers.

What pain points does Zuora address for subscription businesses?

Zuora addresses pain points such as slow manual financial close, ASC 606/IFRS 15 compliance, scaling usage-based monetization, multi-entity and multi-currency management, cash flow and collections, data quality and reporting, spreadsheet dependency, quote-to-cash misalignment, forecasting challenges, and IPO/PE readiness. Automation and integration help resolve these issues.

How does Zuora compare to other subscription billing solutions?

Zuora stands out for its flexibility (supporting 50+ pricing models), scalability (proven by customers like Zoom), AI-powered tools (Zephr for personalized content), hybrid monetization, audit-ready compliance, and a track record of success with leading brands. These strengths make Zuora suitable for complex, high-growth, and global businesses.

What integrations does Zuora support?

Zuora integrates with CRM systems (Salesforce, HubSpot, NetSuite), payment gateways (Stripe, GoCardless), data warehouses (Snowflake, Databricks, BigQuery, RedShift), ERP systems (SAP, Workday), and offers 60+ pre-built connectors. Zephr also integrates with AI Paywall, Mailchimp, Zendesk, and more. See details at https://www.zuora.com/products/zuora-platform/integration-hub/.

Does Zuora offer APIs for integration?

Yes, Zuora provides SOAP and REST APIs for integration with external systems, as well as a v1 API, Quickstart API, Decision Data API, and Content API. These APIs support billing, payment, subscription management, and real-time decision-making. Explore the Developer Center at https://developer.zuora.com/.

What technical documentation is available for Zuora?

Zuora offers comprehensive technical documentation, including the Developer Portal, SDK guides, product documentation for Billing, Payments, CPQ, and Revenue, API changelogs, and legacy CPQ documentation. Access resources at https://developer.zuora.com/.

How quickly can Zuora be implemented?

Zuora's implementation timeline typically ranges from 30 to 90 days, with focused scopes possible in as little as 30 days. Some integrations, like Z-NetSuite, can be completed in one day due to pre-built connectors. Training and support resources are available to accelerate onboarding.

What support and training does Zuora provide?

Zuora offers 24x5 live global support, email support, online ticketing, and premium options like Technical Account Managers. Training is available through Zuora University, which offers 500+ courses, certifications, and virtual classes. Visit the Support Portal at https://support.zuora.com/.

What security and compliance certifications does Zuora have?

Zuora holds certifications including PCI DSS Level 1, SOC 1 Type II, SOC 2 Type II, ISO 27001, ISO 27018, ISO 27701, HIPAA Compliance, and Safe Harbor Compliance. These certifications ensure secure handling of payment information, financial reporting, privacy, and global data protection. See details at https://www.zuora.com/about/legal/.

How does Zuora ensure data security and compliance?

Zuora provides enterprise-grade security with encryption, access control, audit logging, and data-center options in US/EU/APAC. Built-in compliance features include secure integration hubs, analytics, and admin command centers to ensure compliance across multiple markets and regulations.

What real-time product performance metrics does Zuora provide?

Zuora offers real-time product performance metrics such as profitability, conversion rates, and discounting rates. These metrics help businesses respond quickly to market trends, optimize pricing, and improve sales velocity. Integration between CRM and CPQ tools ensures data visibility for informed decision-making. Learn more at https://www.zuora.com/resource/evolving-your-deal-desk-for-modern-business/.

What feedback have customers given about Zuora's ease of use?

Customers like Mindflash, LEAP Legal Software, TripAdvisor, Buildium, and Carbar have praised Zuora for its flexibility, ease of use, rapid implementation, and seamless integration. For example, TripAdvisor reduced sync times from 5 hours to 5 minutes, and Carbar reduced subscription setup time from days to minutes. Read testimonials at https://www.zuora.com/our-customers/case-studies/.

Glossary Hub / Net Revenue Retention: How to Calculate and Why it matters?

Net Revenue Retention: How to Calculate and Why it matters?

As a savvy business owner, you probably already know this, but it’s worth the reminder: acquiring new customers isn’t the most cost-effective way to generate more revenue for your business. Yes, customer acquisition is important, but you’ll spend less and make more by retaining and continuing to sell to your current customer base. This is where Net Revenue Retention (NRR) comes in.

NRR measures how much recurring revenue you’ve retained and generated from existing customers over a set period of time vs. how much you’ve lost from downgrades and cancellations. Calculating net revenue retention gives you a better idea of whether your business retains enough customers to survive and prosper in the long term.

In this post, we’ll dig further into why NRR is a key metric for SaaS companies by sharing the following:

What NRR is and how to use it to contribute to your business’s growth
How to calculate NRR using a simple formula
Ways to improve your business’s net revenue retention rate
The difference between net revenue retention and gross revenue retention

What is Net Revenue Retention?

Net revenue retention is a key metric for subscription-based SaaS companies. It measures the revenue retained from existing customers over a specific period, such as monthly or annually.

If your business is struggling with churn, which could indicate that customers are unsatisfied with your product and service, net revenue retention helps you identify the customer retention problems and areas that need improvement to enhance the customer experience.

To calculate your business’s net revenue retention, you want to consider the following four important factors:

Recurring revenue (monthly or annually)
Expansion revenue (from upsells and cross-sells)
Revenue lost from downgrades
Revenue lost from customer churn

If you’re familiar with net negative churn rate or net dollar retention rate, you may think NRR sounds similar — and it is. These three terms can be used interchangeably. But why even care about this metric in the first place?

Why net revenue retention matters

Net revenue retention is one of the essential customer success KPIs to measure SaaS and subscription-based companies’ business health. It tells you about your business expansion, growth, and retention metrics.
As a SaaS company, you’ll track NRR as a measure to:

View customer satisfaction and loyalty

Net revenue retention helps you identify issues and trends with your customer loyalty, upgrades, and churn.

Strategically acquire new customers

When your customers are satisfied with your product or service, you’ve secured your business as a powerful source for referral and recommendation.

A high NRR is a strong indicator of customer loyalty. It’s also a good indicator of your business’s ability to attract new customers. When existing customers continue to do business with you, it creates a positive impression on potential customers and makes it easier to convert them.

Identify issues related to customer retention and churn

A decline or fall in NRR can be an early warning indicator of potential customer retention or churn issues. Keeping an eye on net revenue retention enables you to identify and address these challenges early.

Forecast the financial health and growth of your business

A consistent high net revenue retention can be a good metric to gain valuable insight into your business’s financial health. And these insights can be used to forecast your business growth accurately.

Better determine whether your customers find long-term value in your service

The trends of your customer upgrades or churn reflect a lot about the value of your service. Especially when customers keep getting value for their money, they want to continue doing business with you, and when they no longer get such value, they churn. A higher NRR can correlate with customers getting long-term value to continue using your service. A lower NRR indicates customers may not find long-term value in using your service.

Factors that influence Net revenue retention

The following factors can influence the net revenue retention of a SaaS company.

Customer churn

This is the percentage of users or customers who canceled their subscriptions or stopped doing business with you. A high churn means a low net revenue. Studies have shown that reducing churn by 5% can increase your profit by 25% – 95%.

Customer lifetime value

This measures how much revenue you expect to generate from a customer over their lifetime with your business. It can impact your revenue retention as it influences your business potential for upselling/cross-selling and repeated purchases from your existing customer. A high LTV shows that your customers will likely generate more revenue for your business, yielding higher NRR.

Gross revenues

This measures the revenue retained from your customers without considering accounting expansion or upgrades. A high gross revenue shows your business generates more revenue from your existing customers and can positively influence your NRR. Note, this doesn’t reflect the actual value of business profits.

Pricing and packaging strategy

Offering customers flexible, personalized, and value-added pricing options can drive customer retention, increasing your net revenue retention. McKinsey’s studies found that a systematic improvement of business pricing can have a lasting impact on profitability.

How to calculate net revenue retention

To calculate net revenue retention, you first need to determine your recurring revenue for a given period of time. This is the total revenue you expect to receive monthly or annually from your recurring customers.

NRR Formula:

NRR = (Starting MRR + Expansion – Churn – Downgrades / Starting MRR) x 100

Once you have your recurring revenue figure, you should add any additional revenue from expansion, such as upsells or cross-sells. Then, you’ll need to subtract revenue lost from downgrades and customer churn.

Example 1: High NRR

For example, assume your business starts this month with $100,000 MRR. Then you’re able to generate $10,000 as additional revenue from upsells and cross-sells to existing customers. However, your customer churn rate for the month is 5%. Hence you’ve lost $5000 in monthly revenue. Also, due to some customers downgrading their subscription, you lost $2000.

How would you calculate the net revenue retention rate for this scenario? Easy. You’ll use this simple net revenue retention formula:
NRR = (Starting MRR + Expansion – Churn – Downgrades / Starting MRR) x 100

Data:
Start MRR = $100,000
Expansion (due to upgrades) = $10,000
Churn rate = (5*100,000/100 = $5,000)
Downgrades = $2,000
Now, here’s how you’d plug in the numbers from the example above:
NRR = ( [$100,000 + $10,000 – $5,000 – $2,000] / $100, 000) * 100
NRR = ( [$110,000 – $7,000] / $100, 000) * 100
NRR = ( $103,000 / $100,000) *100
NRR = 1.03 * 100
NRR = 103

Therefore, the NRR for your business is 103%.

Suppose this month, your company’s expected to generate $300,000 MRR. You also generate $30,000 in additional revenue thanks to upsells and cross-sells. However, your customer churn rate for this month is 20%, so you lost $60,000 ( 20% of $30,000 MRR = $60,000) MRR. You also lost $5,000 of revenue due to some customers downgrading their subscriptions.
Let’s analyze the data:
Start MRR = $300,000
Expansion (due to upgrades) = $30,000
Churn rate = (20% of $30,000 = $6,000)
Downgrades = $5,000
Now, here’s how you’d plug in the numbers from the example above:
NRR = ($300,000 + $30,000 – $60,000 – $5,000 / $300,000) x 100 = 88.3%

What Is a good net revenue retention rate for SaaS companies?

A good net revenue retention rate for a SaaS and subscription-based business is 100% or higher. A 100% or higher rate demonstrates that your business is showing signs of growth despite losing money to churn and downgrades.

On the other hand, a net revenue retention rate below 100% (as we saw in the example above) means that your business is currently losing money and, consequently, not growing.

Here are companies with NRR of 120 or higher

Snowflake – 169%
Twilio – 155%
Datadog – 146%
Slack – 143%
Zoom – 140%
Elastic – 130%
Crowdstrike – 128%

According to the data from SaaSBrief:

100% or below — Investigate and identify the cause of the issue.

110% you’re at the median compared to the industry benchmark 120% and above, your business is on the right track with healthy revenue growth from existing customers.

That being said, a net revenue retention rate of around 90% can still be a good sign. With a few tweaks, your business could have a viable path toward growth.

So, how can you achieve a net revenue retention rate of 100% or higher?

Ways to reduce customer churn and improve net revenue retention

Customer churn is usually the biggest culprit of a low net revenue retention rate. If your churn rate is too high for too long, your business is in danger no matter how many new customers you acquire or how much expansion revenue you generate. Here are some ways to reduce customer churn:

Invest in customer success team (CS)

CS teams create a positive relationship between the company and ensure customers get the value they anticipated from your company. According to a Gartner study, 15% of customer interaction adds value. Furthermore, it illustrates that customers who experience value-enhanced service are likely to stay. Here’s a crash course on the Key SaaS and Customer Success metrics you should be familiar with.

Improve customer support

Ensure you have a strong customer support system that is easy for customers to contact using whichever method they prefer. This could include live chat, phone support, email support, a detailed FAQ page, etc.

Offer incentives

Offering incentives is a great way to keep customers from leaving because it gives them some unexpected additional value. For example, you could offer discounts, freebies, or extended trials.

Increase communication

Keep in touch with your customers regularly to inform them about product updates, impressive case studies, and new ways to use your service. This could be through your email newsletter or social media updates.

Update and improve your product regularly

Continue to add value to your service by making product improvements based on customer feedback. The increased value will help customers feel that their return on investment with your service is growing over time.

Ways to increase expansion and improve net revenue retention

Once you’ve tackled churn, increasing the revenue generated from your existing customer base is another effective way to improve your net revenue retention rate. Here are some ways to increase expansion revenue:

Introduce new premium features

Adding new features to your product is a great way to get customers interested in upgrading. These additional features should reflect your customers’ needs, which can also be found by analyzing customer feedback.

Offer discounts

Offering discounts on upgrades or add-ons is a great way to encourage customers to buy more from you. For example, you can discount existing customers who have recently referred a friend or signed up for annual billing.

Create bundles

Bundling your products and services together is a great way to increase sales. Think about how to market your upsells and cross-sells so they complement each other and offer a discount for buying them together.

Give a free trial

A free trial of the next tier of your service can be a great way to increase expansion revenue. By giving potential customers a taste of what they can get by paying more, you can increase the likelihood they’ll upgrade their subscription. You may also think about a Freemium model.

Ways to prevent downgrades and improve net revenue retention

When a customer downgrades, you have a clear sign that something about your service is failing to justify the price. You’ll want to address these issues immediately to prevent the customer from canceling their subscription. Here are some ways to prevent downgrades:

Encourage annual billing

When customers pay for a year upfront, they’re more likely to stick around for the long haul without requesting to downgrade. If you aren’t already, consider offering a discount for subscribing to an annual plan.

Promote the most valuable features

If you can show customers how much they’re getting for their money, they may be less likely to downgrade. For example, ensure your customers know which features are exclusive to the premium plan.

Ask customers why they’re downgrading

Surveying customers who choose to downgrade can help you identify areas where your product or service is falling short. Then, you can work on making improvements so that customers will be less likely to downgrade in the future.

Net revenue retention vs. gross revenue retention

Gross revenue retention (GRR) is another metric SaaS businesses can check to understand how well they’re doing. GRR also measures the recurring revenue that a company retains. But, unlike NRR, it does not include revenue from expansion from upsells and cross-sells. Consequently, your gross revenue retention will always be equal to or lower than the net revenue retention rate, never exceeding 100%.

Because GRR focuses exclusively on recurring revenue, it’s a more conservative metric than NRR when making financial projections. This makes it a good number to know when speaking to investors concerned about your business’s financial health.
While NRR and GRR are important metrics for SaaS businesses, NRR is a more holistic measure of a business’s growth because it encompasses all aspects of the customer lifecycle.

Net Revenue Retention and Customer Success (CS)

Customer success teams are important in driving any company’s net revenue retention.

They don’t only drive value to existing customers and keep them engaged and satisfied — they give a remarkable level of insight into customers, their challenges, and how a company’s solutions can effectively address those pain points.

In a Podcast on The Revenue Hustle, Michael Maday, Senior Director of Customer Success at Gainsight, speaks about the importance of customer success in driving the company’s NRR:

“No one knows the customer better than we do. No one knows the challenges that they have, the solution that we have, and how those two things can meet together and organically grow an account.”

He further says, “We’re also, in some ways, the protector of our customers from our partners in sales.” The CS team is best positioned to align customer needs with company solutions. By providing relevant solutions and constantly nurturing customer relationships, businesses can experience growth in existing customers, which results in higher net revenue retention.

Michael suggested, “Having your CS team influence growth and be accountable for growth gives you checks and balances.“

Learn more on the correlation between NRR and customer success from the CEO of Gainsight in an interview with McKinsey, “Net retention and customer success: Gainsight CEO Nick Mehta on winning at SaaS.”

The Challenges of Tracking Net Revenue Retention

While there’s no gainsaying about the importance of net revenue retention, tracking it could pose some challenges as its data is spread across multiple sources. Some of the key challenges include:

Metric consistency: NRR has different formulas depending on the formula used (e.g., starting MRR vs. ending MRR, including or excluding expansion revenue, etc.). Ensuring consistency in the calculation used across different periods and comparisons can be challenging, specifically when there are changes in business models, pricing strategies, or accounting practices.
Benchmarking: Due to a lack of standard benchmarks in the industry, benchmarking net revenue retention rates against industry peers or best practices could be challenging. You may have to try to identify and collect relevant benchmarking data and interpret it according to your business’s unique circumstances.
Frequency of tracking: Tracking net revenue retention rates may require regular monitoring and updates to capture changes in customer behavior, market dynamics, or business strategies. Determining the appropriate frequency of tracking and reporting revenue retention rates can take time and effort, depending on the business’ size, complexity, and available data resources.

Who should own NRR

The customer success team should own NRR. This is according to the 2022 Customer Success Leadership study of over 1000 CS leaders. However, it’s important to understand that NRR doesn’t only depend on effort from the CS team alone.

NRR requires input, efforts, strategy, and collaboration from multiple teams, such as a company’s sales, product, finance, and executive teams — since it reflects the company’s ability to retain and generate more revenue from existing customers.

Key takeaways

Net revenue retention is a key metric to determine if your SaaS company is generating enough revenue from your existing customers to offset revenue lost due to churn and downgrades.

To calculate the net revenue retention rate for a particular month, you’ll use the following formula:

NRR = Starting MRR + Expansion – Churn – Downgrades / Starting MRR

If you’d like to calculate it based on annual revenue, you’ll replace MRR with Annual Recurring Revenue (ARR) in that formula.
Ideally, your business will have a net revenue retention rate of 100% or more. But if it’s lower than that, don’t panic just yet. You can improve NRR by using our shared ideas to reduce churn, increase expansion revenue, and prevent downgrades.

Gross revenue retention (GRR) is another key SaaS metric. But, unlike NRR, GRR does not account for expansion revenue, making it a more conservative metric to evaluate your business’s projected financial growth. That said, NRR provides a more holistic measurement of that growth because it accounts for all aspects of the customer lifecycle.

Metric consistency, benchmarking, and frequency tracking are some of the challenges of tracking NRR

Frequently Asked Questions

Net Revenue Retention (NRR) Fundamentals