NRR
Also: NRR, Net Revenue Retention, Net Dollar Retention, NDR, Taux de retention net du revenu, Retention nette du revenu
Net Revenue Retention measures the percentage of recurring revenue retained and grown from existing customers over a period, including upsell and expansion, net of downgrades and churn.
What it is
Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), is the percentage of recurring revenue retained from an existing set of customers over a period (usually 12 months), after accounting for expansion (upsell and cross-sell), contraction (downgrades), and churn (cancellations). Crucially, it excludes revenue from new customers acquired during the period.
The standard formula is:
NRR = (Starting MRR + Expansion, Contraction, Churn) / Starting MRR
An NRR above 100% means the existing base is growing on its own, even before any new sales. Below 100% means the base is shrinking.
Why it matters
- Growth efficiency: High NRR compounds. A company with 120% NRR doubles revenue from its existing base in roughly four years without adding a single new customer.
- Predictability: Recurring, retained revenue is the most reliable base for forecasting and valuation.
- Valuation signal: Investors treat NRR as a leading indicator of product-market fit and pricing power. SaaS benchmarks often cite 100% to 110% as solid and above 120% as best in class.
- Capital efficiency: Expanding existing accounts is usually far cheaper than acquiring new ones.
How it is used in practice
- Segmentation: Track NRR by cohort, plan tier, industry, and region to find where expansion or churn concentrates.
- Cadence: Measured monthly, quarterly, and on a trailing twelve month basis to smooth noise.
- Gross vs net: Compare with Gross Revenue Retention (GRR), which ignores expansion and caps at 100%. A large gap between NRR and GRR means expansion is masking real churn.
- Alignment: Ties customer success, product, and pricing to a single accountable number.
Worked example
Start of year: 200 customers generating $1,000,000 in ARR.
During the year:
- Upsell and expansion: +$250,000
- Downgrades (contraction): -$50,000
- Cancellations (churn): -$100,000
NRR = (1,000,000 + 250,000, 50,000, 100,000) / 1,000,000 = 1,100,000 / 1,000,000 = 110%.
Interpretation: the existing base grew 10% on its own. New logos add on top of this. If GRR here is (1,000,000, 50,000, 100,000) / 1,000,000 = 85%, the gap shows expansion is offsetting meaningful churn that still needs fixing.