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Net Revenue Retention (NRR)

Metric
Revenue

Definition

Measures how much revenue you retain and expand from your existing customer base over a period

Related Knowledge

Annual Recurring Revenue (ARR)Customer Acquisition Cost (CAC)
NRR=Starting MRR+Expansion−Contraction−ChurnStarting MRR×100NRR = \frac{\text{Starting MRR} + \text{Expansion} - \text{Contraction} - \text{Churn}}{\text{Starting MRR}} \times 100

Expansion: Users upgrading their plan (paying more). Churn: Users leaving (paying $0). Contraction: Users downgrading (paying less).

NRR measures how much revenue you retain and expand from your existing customer base over a period.

The #1 metric for SaaS valuation.

Why growth marketers care

  • NRR above 100%
    • The business can grow even without acquiring new customers.
    • Iconic SaaS companies (for example, Snowflake) have reported NRR above 150%.
  • Impact on acquisition and CAC
    • If NRR is below 100%, every new customer you acquire is partially offset by shrinking revenue from existing ones.
    • This makes acquisition costs harder to justify and puts pressure on CAC payback periods.
  • Signals of strong NRR
    • Strong product-market fit.
    • Effective expansion motions (upsell, cross-sell, usage growth).
    • Healthy activation and ongoing engagement.

    • How growth teams move NRR

  • Onboarding and activation (getting users to first value quickly).
  • Feature adoption and habitual usage.
  • Usage-based pricing and plan optimization.
  • Identifying and triggering expansion moments (seat growth, usage tiers, add-ons).
  • Reducing contraction (downgrades) and churn through lifecycle marketing and success motions.

    • NRR vs. GRR

  • Gross Revenue Retention (GRR)
    • Only accounts for contraction and churn.
    • Excludes expansion.
    • Answers: "How well are we keeping existing revenue?"
  • Net Revenue Retention (NRR)
    • Includes expansion, contraction, and churn.
    • Answers: "How is total revenue from our existing customers moving?"

    • A company could have GRR of 85% but NRR of 120% if expansion is strong. GRR shows the "leakage" from the base, while NRR shows whether expansion more than offsets that leakage.