What is Net Revenue Retention?

Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), measures how much recurring revenue you keep from existing customers over a period. It factors in upgrades, downgrades, and cancellations. An NRR above 100% means your existing customers are spending more over time—even without acquiring new ones.

How to Calculate NRR

NRR = (Starting MRR + Expansion − Contraction − Churned) ÷ Starting MRR × 100

Where:

Starting MRR: MRR from existing customers at the beginning of the period
Expansion: Additional MRR from upgrades, add-ons, or seat increases
Contraction: Lost MRR from downgrades
Churned: Lost MRR from cancellations

New customer MRR is intentionally excluded—NRR only measures how your existing customer base grows or shrinks.

Calculation Example

At the start of the month:

Starting MRR (existing customers): $50,000
Expansion MRR (upgrades): $3,000
Contraction MRR (downgrades): $500
Churned MRR (cancellations): $2,000

NRR = ($50,000 + $3,000 − $500 − $2,000) ÷ $50,000 × 100

NRR = $50,500 ÷ $50,000 × 100 = 101%

An NRR of 101% means your existing customers are generating 1% more revenue this month than last, even without any new sign-ups.

Why NRR Is the Metric Investors Care Most About

NRR is often called the single best indicator of SaaS business quality. Here's why:

It shows compounding potential. An NRR >100% means your revenue grows even if you stop acquiring customers. At 120% NRR, your existing base doubles in value every 4 years.
It reflects product-market fit. If customers stick around and spend more, they're clearly getting value.
It separates growth quality. A company growing 50% YoY with 120% NRR is fundamentally different from one growing 50% with 80% NRR—the first is compounding, the second is on a treadmill.

Gross Revenue Retention vs Net Revenue Retention

Gross Revenue Retention (GRR)

The percentage of revenue retained before expansion. Only counts losses (churn + contraction). Maximum value is 100%.

GRR = (Starting − Contraction − Churned) ÷ Starting

Net Revenue Retention (NRR)

The percentage of revenue retained including expansion. Can exceed 100% if expansion outpaces losses.

NRR = (Starting + Expansion − Contraction − Churned) ÷ Starting

NRR Benchmarks

NRR Range

Assessment

<80%

Leaky bucket — revenue is shrinking fast

80–100%

Acceptable, but limited expansion

100–120%

Strong — expansion offsets churn

>120%

Exceptional — common in top public SaaS

Median NRR for publicly traded SaaS companies is around 110–115%. For SMB-focused SaaS, 90–100% is typical.

How to Improve NRR

Build natural expansion paths. Seat-based pricing, usage tiers, or add-on features that grow with the customer.
Reduce involuntary churn. Failed payments cause significant revenue loss. Implement dunning and retry logic.
Identify at-risk accounts early. Usage drops often precede cancellation. Act before the customer decides to leave.
Invest in customer success. Proactive outreach to underutilizing customers improves both retention and expansion.

Related Metrics

MRR Churn Rate ARR Customer LTV

Track Net Revenue Retention with illumi

Connect your Stripe account and see expansion, contraction, and churn broken down automatically. Know your NRR without spreadsheets.

Start Free Trial