What Is Net Revenue Retention (NRR)?

Acquiring new customers is expensive. Retaining and growing revenue from existing customers? That’s where the real money is.

Net Revenue Retention (NRR) measures how much recurring revenue you keep and grow from your existing customer base over time. It’s become the most important metric for SaaS companies and investors.

What Is Net Revenue Retention?

Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), shows the percentage of revenue you retain from existing customers in a specific period.

Here’s what makes NRR special:

• It includes upsells and expansions from existing customers
• It excludes revenue from new customers
• It can exceed 100% (which is great!)
• It shows if your business could grow without adding new customers

Think of it this way: If you stopped acquiring new customers tomorrow, would your revenue still grow? NRR tells you.

How to Calculate Net Revenue Retention

The NRR formula is straightforward:

NRR = (Starting MRR + Expansion – Churn – Downgrades) ÷ Starting MRR × 100

What each part means:

• Starting MRR = Monthly recurring revenue at the beginning of the period
• Expansion = Revenue from upsells, cross-sells, add-ons
• Churn = Revenue lost from cancellations
• Downgrades = Revenue lost from customers reducing their plans

Net Revenue Retention Example

Let’s say your SaaS company starts January with $100,000 in MRR from existing customers.

During January:

• You gain $15,000 from upsells and add-ons
• You lose $5,000 from customer cancellations
• You lose $2,000 from downgrades

Calculation: NRR = ($100,000 + $15,000 – $5,000 – $2,000) ÷ $100,000 × 100 NRR = $108,000 ÷ $100,000 × 100 = 108%

Great! Your NRR is above 100%, meaning you’re growing from existing customers.

What Is a Good NRR Rate?

Industry Benchmarks:

Enterprise SaaS:

• 120%+ = Excellent
• 110-120% = Good
• 100-110% = Average
• Below 100% = Needs improvement

Small/Mid-Market SaaS:

• 100%+ = Excellent
• 90-100% = Good
• 80-90% = Average
• Below 80% = Concerning

Top performers achieve incredible rates:

• Snowflake: 169%
• Twilio: 155%
• Datadog: 146%
• Slack: 143%
• Zoom: 140%

Any NRR above 100% means your business can grow without new customers. That’s powerful.

Why Net Revenue Retention Matters

1. It Predicts Growth

NRR above 100% = your business grows even without new customers. It’s like having a revenue engine that runs itself.

2. Investors Love It

VCs and investors use NRR as a key valuation metric. Companies with high NRR get higher valuations and easier funding.

3. It Shows Customer Happiness

When customers upgrade and expand, they’re telling you your product delivers value. Low NRR often signals product or service issues.

4. It’s More Predictable Than New Sales

Customer acquisition can be volatile. NRR gives you predictable growth you can count on.

Net Revenue Retention vs Gross Revenue Retention

Gross Revenue Retention (GRR):

• Only measures what you keep (no expansion)
• Cannot exceed 100%
• More conservative metric
• Formula: (Starting MRR – Churn – Downgrades) ÷ Starting MRR

Net Revenue Retention (NRR):

• Includes expansion revenue
• Can exceed 100%
• Shows full growth picture
• Better for measuring overall business health

Use both: GRR shows pure retention strength, NRR shows growth potential.

How to Improve Your Net Revenue Retention

Reduce Churn

• Invest in customer success teams
• Improve onboarding processes
• Monitor customer health scores
• Fix product issues quickly
• Offer better customer support

Drive Expansion Revenue

• Create clear upgrade paths in your pricing
• Train teams to identify upsell opportunities
• Add valuable features to higher tiers
• Use data to personalize recommendations
• Offer limited-time upgrade incentives

Prevent Downgrades

• Monitor usage patterns
• Reach out to at-risk customers proactively
• Show value through regular business reviews
• Offer annual contracts with discounts
• Improve product stickiness

What Impacts Net Revenue Retention?

Positive Factors:

• Strong product-market fit
• Excellent customer success programs
• Regular product improvements
• Smart pricing strategy
• High customer satisfaction

Negative Factors:

• High churn rates
• Poor customer support
• Limited upgrade options
• Strong competition
• Economic downturns

Who Owns Net Revenue Retention?

While Customer Success teams typically track NRR, improving it requires everyone:

• Customer Success: Drive adoption and expansion
• Sales: Set proper expectations, sell to ideal customers
• Product: Build sticky, valuable features
• Support: Provide excellent customer experiences
• Marketing: Create content that drives engagement

NRR is a company-wide metric, not just a CS metric.

Common NRR Mistakes to Avoid

• Focusing only on new customers while ignoring existing ones
• Not tracking expansion opportunities systematically
• Waiting too long to address churn signals
• Poor data quality leading to inaccurate calculations
• Not segmenting NRR by customer size or industry

Key Takeaways

Net Revenue Retention is your most important SaaS metric because it shows:

• Whether your customers find ongoing value in your product
• If your business can grow sustainably
• How attractive you are to investors
• Where to focus your improvement efforts

Remember: It’s 5-25x more expensive to acquire new customers than to retain existing ones. Focus on keeping and growing the customers you have.

The bottom line: If you can get your NRR above 100% and keep it there, your business can grow forever – even without adding a single new customer.

Frequently Asked Questions