Net revenue retention vs gross revenue retention
Each, defined
Net revenue retention
Net revenue retention is a recurring-revenue metric, calculated as (Starting + Expansion − Contraction − Churn) ÷ Starting. Can exceed 100%.
Formula: (Starting + Expansion − Contraction − Churn) ÷ Starting
Gross revenue retention
Gross revenue retention is a recurring-revenue metric, calculated as (Starting − Contraction − Churn) ÷ Starting. Caps at 100%.
Formula: (Starting − Contraction − Churn) ÷ Starting
Side by side
| Net revenue retention | Gross revenue retention | |
|---|---|---|
| Expansion | Included | Excluded |
| Can exceed 100% | Yes | No |
| Tells you | Growth from existing customers | How much revenue is kept |
One cohort, two retention rates
A cohort starting at $100,000 of MRR expands by $22,000, contracts by $4,000 and churns $6,000. NRR is 112%; GRR is 90%.
| Line | MRR |
|---|---|
| Starting | 100,000.00 |
| Expansion | 22,000.00 |
| Contraction | (4,000.00) |
| Churn | (6,000.00) |
| Retained (for GRR) | 90,000.00 |
| Ending (for NRR) | 112,000.00 |
How they relate
Both follow the same customers from a starting date. GRR asks how much of the starting revenue survived; NRR asks how much revenue those customers bring in now, upsell included.
High NRR can hide a churn problem when a few large customers expand. GRR is the check on it.
Questions
- Can GRR exceed 100%?
- No. Expansion is excluded, so GRR tops out at 100%.
- Do new customers count?
- New customers are excluded from both. Only the starting cohort counts.
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.