Net Revenue Retention (NRR) – also known as Net Dollar Retention (NDR) – is a key SaaS metric that reflects how much recurring revenue a business retains from its existing customers over a given period, after accounting for upgrades (expansions), downgrades, and churn. It answers the critical question: Is your existing customer base becoming more valuable over time?
If your NRR is above 100%, you’re growing your revenue without acquiring new customers. If it’s below 100%, churn or downgrades are exceeding your expansion efforts. NRR doesn’t just show customer retention – it shows revenue retention and growth potential.
Why NRR Matters in SaaS
For recurring revenue businesses, Net Revenue Retention is often more telling than customer acquisition metrics. It directly reflects the effectiveness of your onboarding, product, support, and account expansion strategies. Here’s why NRR is essential:
- Product Validation: A high NRR proves your product delivers ongoing value. If customers keep paying – and paying more – you’ve achieved strong product-market fit.
- Lower Growth Risk: A company with 110%+ NRR can grow even with flat new customer acquisition.
- Investor Confidence: Investors view strong NRR as a signal of sticky customers and scalable growth.
- CAC Efficiency: If current customers expand accounts, the lifetime value (LTV) rises, improving LTV:CAC ratio.
- Revenue Forecasting: NRR helps finance and leadership teams predict future cash flows with greater accuracy.
How to Calculate Net Revenue Retention
The formula:
NRR (%) = ((Starting MRR + Expansion MRR – Churned MRR – Downgrade MRR) / Starting MRR) × 100
Where:
- Starting MRR: Monthly recurring revenue from existing customers at the start of the period.
- Expansion MRR: Revenue added from existing customers via upsells, add-ons, and cross-sells.
- Churned MRR: Revenue lost from customers who canceled.
- Downgrade MRR: Revenue lost from customers who switched to lower tiers.
Example 1: B2B SaaS – Project Management Software
Company: FlowMatrix
Starting MRR: $400,000
Expansion MRR: $80,000
Churned MRR: $30,000
Downgrade MRR: $10,000
NRR = ((400,000 + 80,000 – 30,000 – 10,000) / 400,000) × 100 = 110%
FlowMatrix is growing 10% from its existing customer base, which signals excellent retention and upselling.
Example 2: B2C SaaS – Streaming Platform
Company: Streamly
Starting MRR: $1,000,000
Expansion MRR: $20,000
Churned MRR: $70,000
Downgrade MRR: $30,000
NRR = ((1,000,000 + 20,000 – 70,000 – 30,000) / 1,000,000) × 100 = 92%
Streamly is losing more revenue from churn and downgrades than it’s gaining via upsells – a warning sign to focus on retention.
Use Cases by Department
- Finance: Predicts long-term revenue from existing accounts.
- Sales: Helps define account expansion strategies and team quotas.
- Customer Success: Prioritizes at-risk accounts and expansion potential.
- Product: Identifies high-value features linked to upgrades.
- Leadership: Evaluates growth health and go-to-market effectiveness.
NRR Benchmarks
- Best-in-class SaaS (Snowflake, Datadog): 120–160% NRR
- Strong Enterprise SaaS: 110–120%
- Average B2B SaaS: 100–105%
- Consumer SaaS: 90–100% typical due to higher churn
Snowflake’s IPO reported a 169% NRR – meaning their existing customers nearly doubled spending annually.
Best Practices to Improve NRR
- Deliver Expansion Features: Offer add-ons and feature-based pricing to drive upgrades.
- In-App Upsell Nudges: Promote premium features through real-time prompts.
- Proactive Customer Success: Identify and help at-risk users before they churn.
- Annual Plans: Lock in customers and reduce voluntary churn.
- Segment and Prioritize: Focus success and sales efforts on high-value accounts.
- Improve Onboarding: Early “aha” moments improve long-term engagement.
Common Mistakes with NRR
- Including New Customers: NRR tracks revenue only from existing customers.
- Ignoring Downgrades: Revenue contractions can mask churn if left unaccounted.
- Using Bookings or Invoices: Only actual revenue counts – exclude deferred or uncollected income.
- Not Segmenting by Cohort: Different customer types yield different retention profiles.
Related Metrics
- Gross Revenue Retention (GRR): Same formula as NRR but excludes expansion.
- Churn Rate: Percentage of lost customers or MRR.
- Expansion Revenue: Portion of revenue gained from upsells.
- Customer Lifetime Value (LTV): Total expected revenue per customer.
- CAC Payback Period: Time to recover acquisition cost.
FAQs
Q1: What’s the difference between NRR and GRR?
A: GRR excludes expansion revenue; NRR includes it. NRR > GRR always.
Q2: Is 100% NRR good?
A: It’s neutral – you’re retaining, but not growing revenue. 110%+ is healthier.
Q3: How often should I calculate NRR?
A: Monthly for internal agility; annually for investor reporting.
Q4: Should I track NRR by product or plan tier?
A: Absolutely. Expansion and churn dynamics vary heavily by segment.
Key Takeaway
Net Revenue Retention is the heartbeat of SaaS growth.
It shows whether your product delivers continuous value and whether your customers stick around and spend more. The higher the NRR, the less you need to rely on costly customer acquisition.
“You don’t just grow by adding new customers. You grow by making every customer more valuable over time.”