NRR (Net Revenue Retention), also called net dollar retention, measures how much recurring revenue a group of existing customers generates now compared with the same group a period ago, counting upgrades, add-ons and usage growth, and subtracting downgrades and cancellations. New customers acquired during the period are excluded.
Why it matters
An NRR above 100% means the existing base grows by itself, because expansion outweighs losses. This is valued by subscription and SaaS investors because it makes growth cheaper and more predictable. Below 100%, the company must keep replacing lost revenue with new sales. Gross revenue retention is a related figure that ignores expansion and so cannot exceed 100%.
Example
Customers at start of year: MRR 100,000
Over the year: +18,000 expansion
-6,000 downgrades
-10,000 cancellations
End MRR from the same customers = 102,000
NRR = 102,000 / 100,000 = 102%Common mistakes
- Including revenue from customers who joined during the period.
- Comparing monthly and annual versions of NRR as if they were the same.
- Letting one large customer's expansion hide widespread churn.
Related
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