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Skip or Ship — Glossary
Net Revenue Retention
Net revenue retention (NRR) measures how revenue from an existing cohort of customers changes over a year, including upgrades, downgrades and cancellations but excluding new customers. Above 100% means the cohort grows on its own.
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Metrics · also known as NRR, net dollar retention
Net revenue retention (NRR) measures how revenue from an existing cohort of customers changes over a year, including upgrades, downgrades and cancellations but excluding new customers. Above 100% means the cohort grows on its own.
What Net Revenue Retention means in practice
NRR isolates the behaviour of customers you already have. By excluding new business it reveals whether the existing base is expanding or eroding — something total revenue growth can easily conceal when acquisition is strong.
Above 100% is a structurally powerful position: expansion from existing accounts more than replaces everything lost to churn and downgrades, so revenue grows even if you acquire no one. This is why NRR is weighted heavily in valuation — it implies compounding growth from work already done.
It is distinct from gross retention, which counts only losses and is capped at 100%. Comparing the two is diagnostic: strong NRR alongside weak gross retention means aggressive expansion is masking a real churn problem, which is far more fragile than the NRR figure alone suggests.
How it is calculated
NRR = ((starting revenue + expansion − contraction − churn) ÷ starting revenue) × 100Measured on an existing cohort only. New customers are excluded by definition.
Worked example
A cohort starting the year at £100,000 of ARR.
- Expansion from upgrades: +£25,000.
- Contraction from downgrades: −£5,000.
- Churn from cancellations: −£12,000.
- NRR = (100,000 + 25,000 − 5,000 − 12,000) ÷ 100,000 = 108%.
Takeaway: The cohort grew 8% without a single new customer — but gross retention was 88%, so roughly one pound in eight is still being lost and simply out-earned by expansion.
Common mistakes
- Including new customers, which turns NRR into a growth metric and defeats its purpose.
- Reporting NRR without gross retention, hiding churn behind expansion.
- Measuring over inconsistent cohort windows so periods are not comparable.
- Assuming strong NRR from a few large accounts represents the whole base.
Related tool: LTV calculator.
Related terms
- Churn Rate — Churn rate is the percentage of customers (or revenue) lost over a given period. It determines how much new business you must win simply to stand still.
- Monthly Recurring Revenue — Monthly recurring revenue (MRR) is the predictable subscription revenue a business earns each month, normalised so annual and multi-year contracts are expressed as a monthly figure.
- Cohort Analysis — Cohort analysis groups customers by when they joined and tracks each group's behaviour over time, revealing retention and revenue patterns that aggregate metrics hide.
- Customer Lifetime Value — Customer lifetime value (LTV) is the total gross profit you expect to earn from a single customer across the whole of their relationship with you, before the cost of acquiring them.
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Frequently asked questions
What is a good net revenue retention rate?
Above 100% is strong, and best-in-class B2B SaaS often reaches 120% or more. Below 90% suggests a retention problem that acquisition will struggle to outrun.
What is the difference between NRR and gross retention?
Gross retention counts only losses and cannot exceed 100%. NRR also counts expansion, so it can exceed 100%. Reading them together shows whether expansion is masking churn.
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