Net Revenue Retention (NRR)
Short Explanation: Net revenue retention (NRR) shows how much recurring revenue you keep and grow from existing customers over a period, after churn and downsells.
In-Depth Explanation
NRR is a core metric for subscription and recurring-revenue businesses. It answers one question: if you stop acquiring new customers, does your existing customer base still grow? NRR includes expansion (upgrades, add-ons, seat growth) and subtracts losses (churn, downgrades, contract reductions). In B2B, strong NRR is a sign of product value, good onboarding, and healthy account management. It also changes how you plan growth: high NRR reduces pressure on new acquisition because the base compounds.
How it Works:
- Pick a cohort: Start with the same customer set and their starting recurring revenue (often at the beginning of the month, quarter, or year).
- Add expansions: Include upgrades, additional modules, more seats, and price increases realized in the period.
- Subtract losses: Subtract churned revenue and any downsells or contract reductions from the same cohort.
- Calculate NRR: NRR = (Starting ARR + Expansion – Churn – Downsells) / Starting ARR.
- Use it with other metrics: Pair NRR with gross revenue retention (GRR) and margin to see whether growth is healthy, not only bigger.
Real-Life Example
A SaaS company starts a quarter with €1,000,000 ARR from existing customers. During the quarter, it adds €180,000 in expansions, loses €60,000 to churn, and has €20,000 in downsells. NRR = (1,000,000 + 180,000 – 60,000 – 20,000) / 1,000,000 = 1.10, or 110%. That means the existing base grew 10% even before new customer sales.