Quick answer
Net revenue retention (NRR) is the recurring revenue you earn now from a group of existing customers, divided by what the same customers paid at the start of the period, including expansion and subtracting contraction and churn. New customers are excluded.
Formula: NRR = (starting MRR + expansion − contraction − churned MRR) ÷ starting MRR · GRR = (starting MRR − contraction − churned MRR) ÷ starting MRR
What is net revenue retention?
Net revenue retention (NRR), also called net dollar retention, asks: of the recurring revenue we had from our customers a year ago, how much are those same customers paying today?
It counts everything that happened to that group:
- Expansion: upgrades, added seats and add-ons push NRR up.
- Contraction: downgrades pull it down.
- Churn: cancelled customers pull it down.
New customers are left out. That cohort rule is what makes NRR useful: it shows whether your existing base grows or shrinks on its own.
Formula and a sample cohort
Take every customer paying on 1 November last year (sample figures):
| MRR | |
|---|---|
| Their MRR then | $40,000 |
| + Expansion since | $6,000 |
| − Contraction since | $1,600 |
| − Churned since | $4,400 |
| Same customers' MRR today | $40,000 |
- NRR = (40,000 + 6,000 − 1,600 − 4,400) ÷ 40,000 = 100%
- Gross revenue retention (GRR) = (40,000 − 1,600 − 4,400) ÷ 40,000 = 85%
The two numbers tell different stories. NRR says the base held steady. GRR says 15% of the revenue walked out and was replaced by upgrades from the customers who stayed. If expansion slows, that 15% loss will show straight away.
How to read NRR
| NRR | What it means |
|---|---|
| Above 100% | Existing customers grow revenue without new sales |
| Around 100% | Expansion just covers losses |
| Below 100% | The base shrinks; new sales must make up the gap first |
Always report NRR next to GRR and the period (monthly or annual), and split it by plan or customer size. A strong NRR from a few large accounts can hide churn among small ones.
Common mistakes
- Including new customers. It turns NRR into total growth and hides churn.
- Using one-off revenue. NRR should be built from MRR, not invoices.
- Picking the period after the fact. Choose monthly or annual once and keep it.
- Reading NRR without GRR. Heavy churn can hide behind a few big upgrades.
Finding what drives retention
NRR comes from billing data, but what drives it usually shows up in product behaviour first. Send subscription and plan-change events from your server, then compare the product usage of customers who expanded with those who churned using cohorts and retention. More in churn rate vs retention rate.
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Data Engineer
Writes about event design, data quality, and collection workflows, with verifiable implementation methods for reliable analytics.