NRR (Net Revenue Retention)

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

• MRR
• Churn rate
• Upsell
• Retention rate

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