What it means
Net revenue retention (NRR) compares what a group of existing customers pays you today with what the same customers paid a year ago. Upgrades, downgrades and cancellations all count. Customers signed since then are left out.
Above 100% means that group grows on its own, even after some customers leave. Below 100% means it shrinks, and new sales have to make up the gap before you grow at all.
Take the customers active at the start of the period, usually twelve months ago, and their recurring revenue then. Add expansion from those same customers and subtract contraction and churn. Divide the result by the starting revenue.
Gross revenue retention uses the same group but ignores expansion, so it can't exceed 100%. Report both, because NRR alone can hide heavy churn behind a few large upgrades. Definitions vary between companies, and net dollar retention is usually the same measure under another name. It's a metric, not a GAAP figure.
Twelve months ago Acme's customers paid $400,000 of ARR. Today those same customers pay $460,000, after $90,000 of upgrades, $10,000 of downgrades and $20,000 lost to cancellations. NRR is $460,000 ÷ $400,000, or 115%. Gross retention is $370,000 ÷ $400,000, or 92.5%. Customers signed during the year add to ARR but to neither ratio. If the pattern holds, 115% means Acme's existing base would grow about 15% next year with no new customers at all.
Why it matters. Above 100% means existing customers grow on their own. Investors read it as a sign the product sticks, and it compounds every new customer you add.
Try it with your numbers
Change any number. The working below updates as you type.
NRR = (Starting + Expansion − Contraction − Churn) ÷ StartingCustomers active twelve months ago, at what they paid then.
Upgrades and added seats.
Downgrades.
Customers who cancelled.
Net revenue retention
115.0%
How it’s worked out
- 1Same customers today$400,000 + $90,000 − $10,000 − $20,000$460,000
- 2Net revenue retention$460,000 ÷ $400,000115.0%
- 3Kept, ignoring expansion$400,000 − $10,000 − $20,000$370,000
- 4Gross revenue retention$370,000 ÷ $400,00092.5%
New customers signed during the period count in neither ratio. Report NRR and GRR together, because NRR alone can hide churn behind a few big upgrades. Neither is a GAAP figure.
Common questions
What's the difference between net and gross revenue retention?
Gross revenue retention counts only contraction and churn, so it can't exceed 100%. Net revenue retention adds expansion, so it can.
Is net dollar retention the same thing?
Usually yes; the names are used interchangeably. Check the definition behind any benchmark before comparing.
What's a good NRR?
Investors often call 100% the floor, 110% or more good and 120% or more excellent, with enterprise products running higher than SMB ones. Benchmarks depend on the definition, so compare like with like.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.