Formula
How to Calculate Net Revenue Retention
The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.
Net Revenue Retention
NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR x 100%
Where
- Starting MRR
- = MRR from existing customers at period start
- Expansion
- = MRR gained from upgrades and cross-sells
- Contraction
- = MRR lost from downgrades
- Churn
- = MRR lost from cancellations
What Is Net Revenue Retention?
Net Revenue Retention (NRR) measures how much revenue a company retains and expands from its existing customer base, accounting for upgrades, downgrades, and churn. NRR above 100% means existing customers are spending more over time (expansion exceeds churn). Top SaaS companies achieve NRR of 120-140%+. It's one of the most scrutinized metrics in SaaS investing.
Worked Example
A SaaS company started the year with $10M in ARR from existing customers. After $2M in expansion, $500K in contraction, and $1M in churn, NRR = ($10M + $2M - $500K - $1M) / $10M = 105%.
Why Net Revenue Retention Matters
NRR above 100% means the company grows even without acquiring new customers. It's a powerful indicator of product-market fit and the most efficient form of revenue growth.
Related Terms
Frequently Asked Questions
How do you calculate Net Revenue Retention?
Net Revenue Retention is calculated using the formula: NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR x 100%. The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.
What is a good Net Revenue Retention?
What constitutes a "good" Net Revenue Retention depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.