Net Revenue Retention Rate vs Gross Revenue Retention Rate

Net Revenue Retention Rate (NRR) and Gross Revenue Retention Rate (GRR) both measure customer retention in SaaS businesses, but they account for different aspects of customer behaviour. NRR calculates the total revenue retained from existing customers over a period, including expansion revenue from upsells, cross-sells, and price increases, as well as contraction from downgrades, potentially exceeding 100% if expansion outpaces churn. GRR, conversely, only measures the revenue retained from existing customers without including any expansion revenue, focusing purely on how well a company retains its existing business and always capping at 100%.

A SaaS company should highlight Net Revenue Retention Rate when speaking to investors or showcasing overall business health, especially when the company has strong upsell motion. For instance, a collaboration platform with an NRR of 115% demonstrates that not only are customers staying, but they're also expanding their usage, signalling strong product-market fit and growth potential. However, the same company should examine Gross Revenue Retention Rate when specifically evaluating churn issues or product satisfaction, as it reveals customer retention problems that might be masked by expansion revenue in the NRR. If the collaboration platform has a GRR of only 75% despite the strong NRR, it indicates that while some customers are significantly expanding, many others are leaving—a potentially serious issue requiring immediate attention to the core product experience.

Net Revenue Retention Rate

Gross Revenue Retention 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.

Gross Revenue Retention (GRR) Rate is the percentage of recurring revenue retained from existing customers in a defined time period, including downgrades, and cancels. It does not include any expansion revenue. GRR is also commonly referred to as Gross Renewal Rate.

Who is it for?

Customer Success Manager

Chief Revenue Officer

Sales Manager

Financial Analyst

Account Executive

Customer Success Manager

Chief Revenue Officer

Sales Manager

Financial Analyst

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(MRR at the beginning of 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 - downgraded ARR during the period - cancelled ARR during the period) / (ARR at the beginning of the 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

Example 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, 2 customers downgrade by $500 each, and 1 customer cancels. Applying the Gross Retention formula, we get ($200,000 - ($500 x 2) - $2,000) / $200,000 = $197,000 / $200,000 = 98.5% GRR expressed monthly

Published and updated dates

Date created: Oct 12, 2022

Latest update: Mar 17, 2025