Net Revenue Retention
Net revenue retention measures recurring revenue kept from existing customers, including expansion, contraction and churn.
Formula
Variables
Example
Start $100k, +$20k expansion, −$5k downgrade, −$8k churn: NRR = 107%
How it works
Net revenue retention compares how much recurring revenue you keep from an initial customer base after accounting for upsells, downgrades, and lost accounts. The numerator starts with the original monthly recurring revenue, then adds expansion and subtracts contraction and churn, so it measures the net amount still being generated from those same customers. Dividing by the starting MRR turns that result into a percentage, making it easy to judge whether the base is shrinking, holding steady, or growing without relying on new sales.
When to use it
Use this when analyzing subscription businesses, SaaS cohorts, or any recurring-revenue portfolio where existing customers can expand, reduce, or cancel. It is especially useful for assessing customer quality and retention performance independent of new customer acquisition.
Worked example, step by step
Starting MRR (M_0) = $250,000 Expansion revenue (E) = $30,000 Contraction (C) = $15,000 Churned revenue (D) = $20,000 Plug into the formula: NRR = (M_0 + E - C - D) / M_0 × 100% NRR = ($250,000 + $30,000 - $15,000 - $20,000) / $250,000 × 100% NRR = $245,000 / $250,000 × 100% NRR = 0.98 × 100% NRR = 98%
Common mistakes to avoid
- Using total company revenue instead of only revenue from the original customer cohort
- Adding new customer revenue into expansion revenue, which inflates retention
- Forgetting that contractions and churn are subtracted, not treated as positive growth
Did You Know?
An NRR above 100% means a company grows from its existing base alone — the gold standard for SaaS.
Share this formula
More in Revenue & Sales
View allTotal Revenue
BasicTotal revenue is the selling price multiplied by the number of units sold.
Net Revenue
BasicNet revenue is gross revenue less returns, refunds and discounts — the amount actually recognised.
Average Revenue
BasicAverage revenue is total revenue divided by units sold — equal to price per unit in a single-price market.
Marginal Revenue
IntermediateMarginal revenue is the extra revenue earned from selling one additional unit.
Revenue Growth Rate
BasicThe percentage change in revenue from one period to the next.
Monthly Recurring Revenue
IntermediateMonthly recurring revenue is the number of active subscribers times average revenue per user per month.