Formula
How to Calculate Net Revenue Retention (NRR)
The percentage of revenue retained from existing customers year-over-year, including upsells and expansions. NRR above 100% means existing customers are growing.
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 (NRR)?
Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), is the gold standard metric for SaaS business quality. It measures how much revenue you retain from your existing customer base over 12 months, including expansions (upsells, seat additions) and losses (churn, downgrades). NRR formula: (Starting MRR + Expansion MRR - Churned MRR - Contraction MRR) / Starting MRR. An NRR of 100% means you're replacing all churned revenue with expansions. Above 100% means existing customers are spending more — your business grows even with zero new customer acquisition. Best-in-class SaaS companies (Snowflake, Datadog, Twilio at their peaks) have achieved NRR of 130-160%. VCs strongly prefer companies with NRR above 120% — it signals product stickiness and organic growth potential.
Worked Example
TechFlow starts 2023 with $100K MRR from existing customers. During the year, these customers generate $25K in upsells and expansions, but $10K contract reductions and $5K in churn. Their NRR calculation: ($100K + $25K - $10K - $5K) / $100K × 100% = 110%. This means their existing customer base grew 10% without acquiring any new customers, demonstrating strong product-market fit and expansion potential.
Why Net Revenue Retention (NRR) Matters
NRR above 100% indicates that existing customers are expanding their usage, reducing dependence on new customer acquisition for growth. This metric directly correlates with company valuation—top-tier SaaS companies maintain NRR above 120%. Poor NRR signals product-market fit issues, competitive pressure, or customer success problems that will eventually impact overall growth and fundraising ability.
Related Terms
Frequently Asked Questions
How do you calculate Net Revenue Retention (NRR)?
Net Revenue Retention (NRR) is calculated using the formula: NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR x 100%. The percentage of revenue retained from existing customers year-over-year, including upsells and expansions. NRR above 100% means existing customers are growing.
What is a good Net Revenue Retention (NRR)?
What constitutes a "good" Net Revenue Retention (NRR) depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.