Net Revenue Retention (NRR) measures how well a business retains and grows revenue from its existing customers over time. A strong NRR (above 100%) means you’re expanding revenue with your current customers, while an NRR under 100% indicates revenue churn, which suggests losses from downgrades or cancellations. This metric helps businesses understand retention and growth potential within their existing customer base.

NRR factors in expansions (such as upsells or cross-sells) and contractions (such as churn or downgrades). By considering these factors, NRR provides insights into a company's ability to not only retain its existing customers but also potentially increase revenue from them. 👏

Net Revenue Retention is calculated using the following formula:

NRR = 100% − ((Churned MRR - Expansion MRR) ÷ Starting MRR 30 days ago x 100)

In simpler terms:
NRR = (100% − Net Revenue Churn)
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If a company's NRR value is greater than 100%, it signifies that it is successfully growing its revenue from its existing customer base. This indicates a strong customer retention strategy and can positively indicate the company's overall growth and success. Conversely, if a company's NRR value is less than 100%, it suggests it is facing revenue churn. This means the company is losing customers or experiencing downgrades in their purchases, resulting in decreased revenue from the existing customer base. Changes in NRR can be caused by several factors, including:

In summary, NRR is a valuable metric that allows businesses to assess their customer retention efforts and understand the impact on their revenue growth. By monitoring and analyzing NRR, companies can make informed decisions to improve customer retention strategies and drive overall business growth.

Want to dive deeper? Check out our guide comparing Net Revenue Retention (NRR) and Gross Revenue Retention (GRR).