Net revenue retention

Definition

Net revenue retention (NRR) measures the percentage of recurring revenue retained from existing customers over a specific period, accounting for expansion, contraction, and churn. NRR indicates whether your existing customer base is growing or shrinking in value.

Key principle: NRR focuses exclusively on existing customers, excluding new customer revenue to isolate retention and expansion performance.

Prerequisite

Monthly recurring revenue (MRR) is the predictable revenue a business can expect each month from active subscriptions.

Formula

NRR = (Starting MRR + Expansion MRR - Contraction MRR - Churn MRR) ÷ Starting MRR × 100

Component breakdown

Component	Definition	Impact on NRR
Starting MRR	Recurring revenue from existing customers at period start	Baseline (denominator)
Expansion MRR	Revenue increases from existing customers	Positive
Contraction MRR	Revenue decreases from existing customers	Negative
Churn MRR	Revenue lost from customer cancellations	Negative

Note: New customer revenue is explicitly excluded from NRR calculation.

Business significance

Performance interpretation

NRR Range	Business Health	Strategic Implication
>110%	Exceptional	Strong expansion, minimal churn - high growth potential
100-110%	Healthy	Good retention with moderate expansion
90-100%	Concerning	Revenue decline from existing customers
<90%	Critical	Significant retention issues requiring immediate action

Strategic importance

Growth sustainability: High NRR indicates sustainable growth from existing customer investment
Product-market fit: Strong NRR suggests customers find increasing value in your solution Expansion opportunity: Shows effectiveness of upsell and cross-sell strategies Churn impact: Reveals true cost of customer acquisition vs. retention Investor confidence: Key SaaS metric for valuation and growth assessment

Industry benchmarks

Best-in-class SaaS: 120%+ NRR
Good SaaS companies: 110-120% NRR
Average performance: 100-110% NRR
Below average: < 100% NRR

Calculation methodology in Zenskar

Data sources

Monthly recurring revenue (MRR) from active subscriptions
Customer cohort tracking to identify existing vs. new customers
Subscription change events (upgrades, downgrades, cancellations)
Usage-based billing adjustments normalized to monthly values

Time period considerations

Monthly NRR: Month-over-month retention analysis
Annual NRR: Year-over-year retention for seasonal businesses
Cohort-based NRR: Retention by customer acquisition period

Visualization components

NRR trend chart

Chart type: Line chart tracking NRR percentage over time

Key visual elements:

X-axis: Time periods (months/quarters)
Y-axis: NRR percentage (typically 80-120% range)
Benchmark line: 100% NRR reference line
Trend indicators: Color coding for performance ranges

Interpretation guidelines:

Upward trends: Improving expansion and retention
Consistent >100%: Healthy existing customer growth
Volatility: Investigate underlying expansion/churn patterns
Declining trends: Early warning of retention issues

NRR breakdown table

Data structure: Detailed monthly components for analysis

Key columns:

Period: Month/quarter identifier
Starting MRR: Baseline existing customer revenue
Expansion MRR: Upsell and expansion revenue
Contraction MRR: Downgrade and reduction amounts
Churn MRR: Lost revenue from cancellations
NRR %: Calculated retention percentage

Advanced analysis techniques

Cohort-based NRR analysis

Track NRR by customer acquisition cohort:

Cohort NRR = Revenue from [Acquisition Cohort] in [Period N] ÷
Initial Revenue from [Acquisition Cohort] × 100

Segmented NRR analysis

By customer size: Enterprise vs. SMB retention patterns
By product line: Individual product retention performance
By acquisition channel: Channel effectiveness for long-term value
By geographic region: Regional retention variations

Leading indicators

Expansion MRR growth: Early signal of improving NRR
Contraction MRR increases: Warning sign of declining NRR
Customer health scores: Predictive indicator of future NRR
Product usage metrics: Correlation with retention performance

Relationship to other metrics

Complementary metrics

**Gross Revenue Retention (GRR) **: Pure retention excluding expansion effects

GRR focuses on baseline retention
NRR adds expansion impact
Together provide complete retention picture

**Monthly Recurring Revenue (MRR) **: Overall revenue trend context

MRR shows total growth including new customers
NRR isolates existing customer performance
Combined analysis shows growth composition

**Customer churn rate **: Customer-level retention metrics

Churn rate measures customer count retention
NRR measures revenue retention
Revenue retention often outperforms customer retention due to expansion

Metric relationships

High NRR + High GRR: Excellent retention with strong expansion
High NRR + Lower GRR: Expansion masking retention issues
Low NRR + Low GRR: Fundamental retention problems
Stable NRR + Growing MRR: Balanced new customer acquisition and retention

Optimization strategies

Improving expansion revenue

Usage-based pricing: Align revenue with customer value realization
Product bundling: Encourage multi-product adoption
Success-driven upsells: Time upgrades with usage milestones
Account management: Dedicated resources for expansion opportunities

Reducing contraction and churn

Customer health monitoring: Proactive intervention systems
Onboarding optimization: Ensure strong initial product adoption
Regular business reviews: Maintain alignment with customer goals
Competitive analysis: Address feature gaps causing churn

Measurement best practices

Regular monitoring: Monthly NRR tracking and analysis
Segment analysis: Identify high-performing customer segments
Predictive modeling: Forecast NRR trends and intervention needs
Cross-functional alignment: Share insights across sales, CS, and product teams

NRR is automatically calculated based on your subscription data and customer activity. Historical data allows for trend analysis and benchmarking.