Net and gross revenue retention
Northwind Care's first cohort a year on: NRR and GRR from one MRR bridge, and why they travel together.
Retention is measured on a cohort: the customers on the plan at the start of the period, and only them. New customers are left out of both sides. Start from their MRR then, add what they upgraded, take off what they downgraded and what cancelled, and divide by where they started. With expansion, that's net revenue retention. Without it, gross revenue retention, which can never pass 100%.
Wrong
"Retention is 100.0%." (Which retention? Which cohort?)
Right
NRR 100.0% · GRR 85.0% Cohort: customers on the plan at the start of the year
NRR alone lets expansion hide churn. Two plans with the same NRR can lose very different shares of their base. GRR is the share kept with no help from upgrades.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Background reading — not an authority
- Wikipedia, “Churn rate” (opens in a new tab)Churn rate — backgroundFree to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Net revenue retentionNet revenue retention is a recurring-revenue metric, calculated as (Starting + Expansion − Contraction − Churn) ÷ Starting.Convention
- Gross revenue retentionGross revenue retention is a recurring-revenue metric, calculated as (Starting − Contraction − Churn) ÷ Starting.Convention
- Expansion MRRExpansion MRR is a recurring-revenue metric, calculated as Upgrades and seat additions from existing customers.Convention
- Contraction MRRContraction MRR is a recurring-revenue metric, calculated as Downgrades, not cancellations.Convention
- Churned MRRChurned MRR is a recurring-revenue metric, calculated as Full cancellations.Convention
- MRRMRR is a recurring-revenue metric, calculated as Sum of normalized monthly recurring subscription value.Convention
See also
- Net new MRR calculatorNet new MRR is a recurring-revenue metric, calculated as New + Expansion − Contraction − Churned.
- Logo churn calculatorLogo churn is a recurring-revenue metric, calculated as Customers lost ÷ starting customers.
- Net revenue retentionRecurring revenue from a group of customers today, as a percentage of what the same customers paid a year ago, after expansion, downgrades and churn. New customers are left out. It's a metric, not a GAAP figure.
- Gross revenue retentionRecurring revenue kept from a group of customers a year later, after downgrades and cancellations but ignoring upgrades, as a percentage of what they paid then. It can't exceed 100%. It's a metric, not a GAAP figure.