What Is Net Revenue Retention (NRR)?
Also known as NRR, Net dollar retention, NDR, Net retention rate
Net revenue retention (NRR) is the percentage of recurring revenue a company keeps from an existing group of customers over a period, after adding expansion and subtracting downgrades and churn. It ignores revenue from new customers. NRR above 100% means the existing customer base is growing on its own, which is a strong sign of product value.
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Open the toolNet Revenue Retention (NRR) explained
NRR tracks a fixed cohort. Take the recurring revenue from customers active at the start of a period, usually twelve months, then measure what those same customers pay at the end. Upsells, extra seats and price increases push it up. Downgrades and cancellations pull it down. New customers signed during the period are left out entirely.
NRR above 100% is widely treated as a mark of a healthy SaaS business, and many investors weight it heavily because it shows growth that does not depend on new sales. A company with 120% NRR grows 20% a year from its existing base before closing a single new deal, which makes every new customer worth more over time.
For go-to-market teams, NRR changes how acquisition is valued. If customers reliably expand, it can make sense to land smaller first contracts and grow them, accepting a higher upfront CAC. NRR is best read alongside gross revenue retention, which shows losses without expansion masking them, so you can see whether strong upsells are hiding a churn problem.
Net Revenue Retention (NRR) formula
NRR = (Starting recurring revenue + Expansion − Contraction − Churned revenue) ÷ Starting recurring revenue × 100
- Starting recurring revenue
- MRR or ARR from customers active at the start of the period. New customers added later are excluded.
- Expansion
- Extra recurring revenue from those same customers through upgrades, added seats, add-ons or price increases.
- Contraction
- Recurring revenue lost when existing customers downgrade plans, remove seats or receive new discounts.
- Churned revenue
- Recurring revenue lost from customers in the starting cohort who cancelled or did not renew.
Worked example: A cohort starts the year at $100,000 MRR. Over twelve months it adds $15,000 in expansion, loses $3,000 to downgrades and $5,000 to cancellations. NRR = ($100,000 + $15,000 − $3,000 − $5,000) ÷ $100,000 × 100 = 107%.
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Net Revenue Retention (NRR) example
A sales engagement platform has $4M ARR from customers active last January. A year later those same customers generate $4.6M: $800,000 came from added seats and a new analytics add-on, while $200,000 was lost to cancellations and downgrades. NRR is $4.6M ÷ $4M, or 115%. The company decides to fund a customer expansion team before adding more outbound SDRs.
How to calculate net revenue retention
Pick the cohort
Take all customers paying you at the start of the period, usually twelve months ago, and record their recurring revenue.
Measure the same customers now
Find what that exact group pays today. Ignore any customer who joined after the starting date.
Separate the movements
Break the change into expansion, contraction and churn so you can see what drove the result, not just the total.
Divide by the start value
Divide the cohort's current recurring revenue by its starting value and multiply by 100 to get NRR as a percentage.
Common mistakes
- Including revenue from new customers signed during the period, which inflates NRR and defeats its purpose.
- Reporting NRR without GRR, letting strong expansion from a few accounts hide widespread churn underneath.
- Counting one-time services or usage spikes as expansion when they are not recurring revenue.
- Comparing a monthly NRR figure with an annual benchmark without converting between the two.
Net Revenue Retention (NRR) FAQ
NRR above 100% is the widely accepted line for healthy SaaS, since it means existing customers grow revenue on their own. Companies selling to larger enterprises often run well above that, while SMB-focused products tend to sit lower because small customers churn more and expand less.
NRR includes expansion revenue, so it can go above 100%. GRR, or gross revenue retention, only counts losses from downgrades and churn, so it is capped at 100%. GRR shows how well you keep revenue, and NRR shows how well you keep and grow it.
Yes. Net dollar retention, NDR and net retention rate are different names for the same metric. Some companies calculate it from MRR and others from ARR, so check the method and time frame when comparing numbers between companies.
Reduce churn through better onboarding and customer success, then build clear expansion paths such as seat-based pricing, usage tiers and add-ons. Targeting customers that fit your ideal profile also helps, since well-matched accounts tend to stay longer and grow more.