What is Net Revenue Retention (NRR)?
Net Revenue Retention measures the percentage of recurring revenue you keep and expand from your existing customers over a period after accounting for expansion, reactivation, contraction, and churn.
It answers a simple question: if you stopped acquiring new customers today, would your revenue base grow, stay flat, or shrink.
For SaaS and subscription businesses, NRR is a core value-creation metric that sits next to ARR growth, gross revenue retention, LTV/CAC, and CAC payback when investors assess quality of growth.
Formula
You can express revenue on an MRR or ARR basis, as long as the same period is used for all components.
A related metric, gross revenue retention (GRR), strips out expansion and reactivation to focus purely on logo and dollar churn:
In practice, NRR above 100% signals net expansion from the existing base, while NRR below 100% signals net contraction that must be offset by aggressive new customer acquisition.
Example
Assume you start the month with $120,000 in MRR from existing customers.
During the month you generate $18,000 in expansion MRR (upsells and price increases), $2,000 in reactivation MRR, $6,000 in contraction MRR (downgrades), and $8,000 in churned MRR (lost customers).
Ending recurring revenue from this starting cohort is:
- Ending revenue = 120,000 + 18,000 + 2,000 − 6,000 − 8,000 = $126,000
Net Revenue Retention is:
- NRR = 126,000 ÷ 120,000 × 100% = 105%
Gross Revenue Retention is:
- GRR = (120,000 − 6,000 − 8,000) ÷ 120,000 × 100% ≈ 88.3%
In this scenario, your existing base is delivering modest net expansion (NRR 105%) despite some contraction and churn, which generally supports healthier ARR growth, stronger LTV, and better SaaS valuation multiples—provided you keep acquisition efficiency (CAC and CAC payback period) under control.