Net Revenue Retention (NRR)

Net Revenue Retention (NRR) measures how much revenue you retain and grow from existing customers over time, accounting for upgrades, downgrades, and churn.

How to Calculate NRR

NRR = ((Starting ARR + Expansion ARR – Contraction ARR – Churned ARR) / Starting ARR) × 100

For example, if you started with $100K ARR, added $20K in expansions, lost $5K to contractions and $10K to churn: NRR = (($100K + $20K – $5K – $10K) / $100K) × 100 = 105%

Why NRR Matters

NRR above 100% indicates that revenue from existing customers is growing, which is a strong indicator of: – Product-market fit – Customer satisfaction – Pricing power – Growth efficiency

NRR Benchmarks

100%+: Excellent retention with growth

90-100%: Good retention

80-90%: Concerning retention levels

Below 80%: Significant churn issues

Best-in-Class NRR

110-130% NRR: World-class performance

Snowflake: ~170% NRR

MongoDB: ~120% NRR

Datadog: ~130% NRR

Strategies to Improve NRR

1. Reduce Churn: Focus on customer success
2. Drive Expansions: Land and expand strategy
3. Add Value: Continuous product improvement
4. Upsell/Cross-sell: Identify growth opportunities
5. Pricing Optimization: Value-based pricing

NRR vs. GRR

Net Revenue Retention (NRR): Includes expansion revenue

Gross Revenue Retention (GRR): Only measures retained revenue, excluding expansions

Cohort-Based NRR

Analyze NRR by customer cohorts to understand: – How retention improves over time – Which customer segments have highest NRR – Impact of product changes on retention – Seasonal retention patterns

NRR is considered one of the most important metrics for SaaS businesses, as it combines retention and growth in a single metric.