Net Revenue Retention (NRR) measures how much recurring revenue you keep from existing customers over time, including expansions, upgrades, downgrades, and cancellations. The formula is (Starting MRR + Expansion − Contraction − Churn) ÷ Starting MRR × 100. Above 100% means revenue grows from your base alone; best-in-class SaaS exceeds 120%.
What is Net Revenue Retention (NRR) in SaaS?
Net Revenue Retention measures how much recurring revenue you keep from existing customers over time, including expansions, upgrades, downgrades, and cancellations.
👆 By the way, an interesting fact: high-NRR companies (120%+) that are also growing fast (80%+ YoY) have commanded premium revenue multiples of 18-22x; more typical 120%+ NRR companies trade around 7-9x, while those below 100% NRR sit closer to 4-6x.
Why is Net Revenue Retention important?
Sustainable Growth 📈
- Shows organic growth from existing customers
- Indicates product stickiness
- Reveals upsell success
Investment Appeal 💎
- Key metric for investors
- Influences company valuation
- Shows business sustainability
Customer Success 🌟
- Reflects customer satisfaction
- Shows product value
- Indicates market fit
How to calculate the Net Revenue Retention rate
Net Revenue Retention Formula
NRR = (Starting MRR + Expansion − Contraction − Churn) ÷ Starting MRR × 100Includes expansion, can exceed 100%
Where:
Starting MRR = Monthly Recurring Revenue at period start
Expansion = Additional revenue from existing customers
Contraction = Revenue lost from downgrades
Churn = Revenue lost from cancellations
Example Time
Let’s say:
- Starting MRR: $100,000
- Expansion: $30,000
- Contraction: $5,000
- Churn: $10,000
($100,000 + $30,000 − $5,000 − $10,000) ÷ $100,000 × 100 = 115%Worked example, healthy growth
What is a good Net Revenue Retention rate in SaaS?
- Under 100%: 😟 Net revenue loss
- 100-105%: 😐 Stable but needs improvement
- 105-120%: 😊 Healthy growth
- Above 120%: 🤩 Outstanding growth!
What’s the difference between NRR & Gross Revenue Retention (GRR)?
Net Revenue Retention (NRR)
- Includes expansions/upgrades
- Can exceed 100%
- Shows growth potential
- Full revenue picture
Gross Revenue Retention (GRR)
- Excludes expansions/upgrades
- Cannot exceed 100%
- Shows retention strength
- Base revenue stability
Think of it this way:
- GRR = How good you are at keeping what you have
- NRR = How good you are at growing what you have
Net Revenue Retention FAQ
How do you calculate NRR?
(Starting MRR + Expansion − Contraction − Churn) ÷ Starting MRR × 100. $100K start + $30K expansion − $5K contraction − $10K churn = 115% NRR.
What is a good NRR?
Under 100% means net revenue loss; 100–105% is stable; 105–120% is healthy; above 120% is outstanding. High-NRR companies command far higher valuation multiples.
What's the difference between NRR and GRR?
NRR includes expansion revenue and can exceed 100%; GRR excludes expansion and caps at 100%. NRR shows growth; GRR shows pure retention strength.
Why do investors care about NRR?
NRR above 100% means the business grows even without new customers, a strong signal of product-market fit and efficient, compounding growth, which drives premium valuations.
Related retention metrics
- Revenue Retention Rate, the overview metric, start here.
- Gross Revenue Retention (GRR), revenue kept from existing customers, excluding expansion.
- Net Revenue Retention (NRR), revenue kept including expansion/upsell. (you are here)
