Net revenue retention (NRR)
Also known as: NRR, net dollar retention, NDR, net revenue retention rate
Net revenue retention (NRR) is the recurring revenue a group of existing customers generates at the end of a period, including upgrades, downgrades and cancellations, as a percentage of what the same group generated at the start.
NRR = (starting MRR + expansion − contraction − churned MRR) / starting MRR × 100%NRR answers whether your existing customers, taken as a group, pay you more or less over time. Unlike churn rate, it weighs customers by revenue, and unlike gross revenue retention, it adds upgrades back in. That is why NRR can exceed 100% while you are still losing customers.
Example
On 1 January, existing customers of a B2B SaaS company bring in $200,000 MRR. Over the next twelve months, measured only on those same customers:
- expansion from upgrades and extra seats: +$36,000;
- contraction from downgrades: −$8,000;
- churned MRR from cancellations: −$18,000.
NRR: (200,000 + 36,000 − 8,000 − 18,000) / 200,000 = 105%. Gross revenue retention, without expansion: (200,000 − 8,000 − 18,000) / 200,000 = 87%.
The cohort grew revenue by 5%, even though downgrades and cancellations removed 13% from the starting base. The figures are illustrative.
How to use it
Report NRR and gross revenue retention side by side. NRR shows how much expansion you can count on. Gross retention shows how much the base leaks before expansion covers it. A high NRR built on a few large upsells can hide a weak core.
Measure on a fixed cohort over twelve months, and exclude revenue from customers who joined after the start date. Price increases count as expansion, so note them separately if you raised prices that year.
Common mistakes
- Including new customers’ revenue, which turns NRR into a growth rate.
- Mixing one-off fees such as setup or services into recurring revenue.
- Comparing a monthly NRR with someone else’s annual figure.