Business Definition of "NRR"
NRR stands for Net Revenue Retention, a SaaS metric that measures the percentage of recurring revenue retained from existing customers over a given period, including upgrades, downgrades, and churn. An NRR above 100% means the company is growing revenue from existing customers even without acquiring new ones.
What Does “NRR” Mean?
NRR (Net Revenue Retention) tells you whether your existing customers are spending more or less over time. It’s one of the most important metrics for SaaS and subscription businesses because it reveals whether your product is sticky enough to grow revenue without constantly chasing new customers.
If your NRR is 110%, that means for every $100 of revenue you had last year from a cohort of customers, you now have $110 from that same group. This happens when upgrades and expansions outweigh churn and downgrades.
How to calculate NRR
The formula is:
NRR = (Starting Revenue + Expansion - Contraction - Churn) / Starting Revenue x 100
For example, if you started with $1M in ARR from a customer cohort, gained $200K from upgrades, lost $50K from downgrades, and lost $100K from churn, your NRR would be:
($1M + $200K - $50K - $100K) / $1M = 105%
What is a good NRR?
In SaaS, the benchmarks are roughly:
- Below 80%: Your product has a serious retention problem
- 80% to 100%: Acceptable, but you’re relying heavily on new customer acquisition
- 100% to 120%: Good, you’re growing from existing customers
- Above 120%: Excellent, typical of the best enterprise SaaS companies
Snowflake famously had NRR above 170% during its high-growth period. This meant customers were spending nearly twice as much in year two compared to year one.
NRR vs GRR
NRR and GRR (Gross Revenue Retention) are related but measure different things.
GRR only measures how much revenue you kept, ignoring expansion. It shows your baseline retention before upsells kick in. GRR can never exceed 100% because it doesn’t count revenue increases.
NRR includes expansion revenue, so it can exceed 100%. A company might have 90% GRR (10% churn) but 115% NRR because the customers who stayed upgraded enough to offset the losses.
Both metrics are useful. GRR shows your floor. NRR shows your ceiling.
Why investors care about NRR
For SaaS investors, NRR above 100% is extremely attractive because it means the company can grow even if it stops acquiring new customers entirely. This is sometimes called “negative churn” and it dramatically improves the economics of the business.
High NRR companies can afford to spend more on customer acquisition because each customer becomes more valuable over time. Low NRR companies are on a treadmill, constantly needing new customers just to maintain revenue.
Usage Example
Our NRR dropped to 95% last quarter. We need to focus on customer success before expanding the sales team.
This is a reasonable take. If existing customers are shrinking, adding more customers just adds more problems.
Synonyms and variations of NRR
- Net Revenue Retention
- Net Dollar Retention (NDR)
- Net Revenue Retention Rate
- Dollar-based Net Retention
Frequently Asked Questions
What does NRR stand for?
NRR stands for Net Revenue Retention. It's a key metric for SaaS and subscription businesses that shows how much revenue is retained from existing customers, accounting for upgrades, downgrades, and cancellations.
What is a good NRR?
For SaaS companies, an NRR above 100% is considered good, meaning revenue from existing customers is growing. Top-performing SaaS companies often have NRR between 120% and 140%. Enterprise-focused companies typically have higher NRR than SMB-focused ones.
What is the difference between NRR and GRR?
NRR (Net Revenue Retention) includes expansion revenue from upsells and cross-sells, while GRR (Gross Revenue Retention) only measures how much revenue you kept without counting upgrades. GRR can never exceed 100%, while NRR can.
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