Net Revenue Retention Rate vs Expansion MRR Growth Rate

Net Revenue Retention Rate (NRR) and Expansion MRR Growth Rate are both critical SaaS metrics that measure revenue growth from existing customers, but they serve distinctly different analytical purposes. NRR is a cohort-based metric that measures the percentage of revenue retained from a specific group of customers over a defined period (typically annual), accounting for upgrades, downgrades, and churn within that cohort. It answers the fundamental question: "Are we growing or shrinking our revenue from existing customers?" An NRR above 100% indicates net expansion, while below 100% signals net contraction. In contrast, Expansion MRR Growth Rate is a period-over-period metric that measures the absolute dollar growth in monthly recurring revenue from existing customers through upsells, cross-sells, and expansions, typically expressed as a percentage increase month-over-month or year-over-year.

The strategic applications of these metrics differ significantly in driving business decisions. NRR is invaluable for long-term strategic planning and investor communications, as it demonstrates the company's ability to grow revenue without acquiring new customers and indicates product-market fit strength. A strong NRR (ideally 110%+) suggests sustainable growth and reduces dependence on costly customer acquisition. Expansion MRR Growth Rate, however, is more tactical and operational, helping sales and customer success teams identify momentum in expansion activities, optimize pricing strategies, and allocate resources toward high-growth customer segments. While NRR provides the "big picture" health check of customer revenue retention, Expansion MRR Growth Rate offers actionable insights for immediate revenue optimization and helps teams understand which expansion strategies are working in real-time.

Net Revenue Retention Rate

Expansion MRR Growth Rate

What is it?

Net Revenue Retention (NRR) Rate, also known as Net Dollar Retention (NDR), is the percentage of recurring revenue retained from existing customers in a defined time period, including expansion revenue, downgrades, and cancels. This churn metric gives a comprehensive view of positive as well as negative changes with respect to customer retention.

Expansion Monthly Recurring Revenue (MRR) Growth Rate measures how quickly your existing customers are increasing their spending with you, expressed as a percentage of your total MRR base. This metric captures the velocity of revenue expansion from upsells, cross-sells, add-ons, and seat expansions within your current customer cohort. While typically reported monthly (e.g., "Our Expansion MRR Growth Rate was 4.2% in March"), it can also be annualised for strategic planning purposes (e.g., "We achieved a 65% annual Expansion MRR Growth Rate last year"). This metric is fundamentally different from simple expansion revenue totals because it contextualises growth against your entire revenue base, making it particularly valuable for benchmarking and forecasting as your business scales.

Who is it for?

Customer Success Manager

Chief Revenue Officer

Sales Manager

Financial Analyst

Account Executive

Chief Revenue Officer

Sales Manager

Customer Success Manager

Chief Financial Officer

Formula

ƒ Sum(MRR at the beginning of the period + expansion MRR during the period - downgraded MRR during the period - cancelled MRR during the period) / (MRR at the beginning of the period)

ƒ Sum(ARR at the beginning of the period + expansion ARR during the period - downgraded ARR during the period - cancelled ARR during the period) / (ARR at the beginning of the period)

ƒ Sum(renewing customers MRR or ARR) / Sum(MRR or ARR of customers due to renew)

ƒ Sum(Expansion MRR in period) / Sum(total MRR beginning of period)

Example

Here's an example of how to calculate Net Revenue Retention (NRR). We'll call this scenario A: A company has 100 customers, each paying $2,000 per month. MRR at the beginning of the month is $200,000. Within the month, 1 customer adds a $4,000 MRR upgrade, 2 downgrade by $500 each, and 1 customer cancels. Based on the Net Dollar Retention formula, NRR = ($200,000 + $4,000 - ($500 x 2) - $2,000) / $200,000 = $201,000 / $200,000 = 100.5% expressed monthly Now let's look at Scenario B: Another company has 100 customers paying $20,000 for annual subscriptions. Within a one month period, 10 customers are due for renewal, only 9 actually renew, 1 adds a $5000 ARR upgrade, and 2 downgrade their subscription by $2000 each. Net Dollar Retention = ($20,000 x 9) + $5,000 - ($2,000 x 2)) / ($2,000 MRR x 10) = $19,000 / $20,000 = 95.0% expressed monthly

A SaaS company begins January with $750K in MRR. During January, existing customers generate $22.5K in expansion revenue through various upsells and cross-sells. Calculation: $22.5K ÷ $750K = 3.0% monthly Expansion MRR Growth Rate If this company maintained this rate consistently, they would achieve a 36% annual expansion rate, which represents exceptional performance for most SaaS businesses. Note: Use the MRR value at the start of the measurement period as your denominator to avoid artificial inflation. Include all forms of expansion: plan upgrades, additional seats, feature add-ons, and usage-based increases. Exclude any revenue from reactivated churned customers, as this should be tracked separately.

Published and updated dates

Date created: Oct 12, 2022

Latest update: Aug 8, 2025