The definitional questions about NRR that every SaaS team argues over at least once: does it include churn, new customers, price increases, can it be over 100%, how it differs from gross revenue retention and net dollar retention, how to calculate it on a cohort, and what good looks like by stage. With the formula, a worked example, and the three ways the number gets inflated.
Short answer
What is net revenue retention and what does it include?
Net revenue retention (NRR) is the recurring revenue a fixed cohort of existing customers pays at the end of a period, as a percentage of what they paid at the start. It includes expansion, price increases, downgrades and churn from those customers. It excludes new customers entirely. It can exceed 100% (expansion outran losses); its sibling, gross revenue retention, cannot. Formula: (start + expansion − contraction − churn) ÷ start.
NRR is the number a VP of Customer Success is personally measured on, the number a board asks for before logo count, and the number that gets argued about in more finance meetings than any other SaaS metric, usually because two people in the room are computing it differently. This guide settles the definitional questions first, then the formula, a worked example, the benchmarks, and the three ways the figure gets inflated.
Take every customer that was paying on day one of the period. Call that the cohort. Twelve months later, add up what that same cohort pays now. Divide by what they paid on day one. That ratio is NRR.
Everything else follows from “same cohort”. A customer who joined in month three is not in the cohort, so their revenue does not count, however large. A customer who cancelled in month nine is in the cohort, so their revenue counts as zero at the end. A customer who doubled their seats counts at double.
| Item | In NRR? | Why |
|---|---|---|
| Churned customers | Yes, as a loss | Their revenue at the end is zero. This is the “net” in net retention. |
| Downgrades (contraction) | Yes, as a loss | Same customer, less revenue. |
| Upgrades, added seats, usage growth | Yes, as a gain | Same customer, more revenue. This is expansion. |
| Price increases | Yes, as a gain | Raises the cohort’s revenue. Disclose it separately when comparing across companies. |
| New customers | No | Not in the cohort. Counting them turns NRR into growth. |
| One-time fees, services | No | Not recurring. NRR is a recurring-revenue metric. |
| Customers won back after churning | Usually no | They left the cohort; treat reactivation as new. Some companies count it; say so if you do. |
NRR = (starting revenue + expansion − contraction − churned revenue) ÷ starting revenue, on one cohort, over one period. Use MRR or ARR consistently; the ratio is the same either way. The period is usually twelve months. A monthly NRR exists but compounds confusingly (1% monthly expansion is 12.7% annual), so most teams report the annual figure.
GRR = (starting revenue − contraction − churned revenue) ÷ starting revenue. Same thing without the expansion. GRR is capped at 100% by construction and is the harder, more honest number: it says how leaky the bucket is before anyone starts pouring more in.
On 1 January a SaaS company has 120 customers paying $200,000 MRR. Over the year, within that cohort: 14 customers cancel ($18,000 MRR), 9 downgrade (−$6,000), 31 upgrade or add seats (+$29,000), and a 5% price increase in July adds $8,500 across the customers who stayed. Separately, the company signs 40 new customers worth $70,000 MRR.
| Segment | Good | Top decile | Concern |
|---|---|---|---|
| Enterprise ($50K+ ACV) | 110%+ | 120-130% | Below 100% |
| Mid-market ($5K-$50K) | 105%+ | 115%+ | Below 95% |
| SMB / self-serve | 100%+ | 110%+ | Below 90% |
These are industry ranges, not a measurement Exeechain took, and they move with the market: the public-company figures that set the top of the range were highest in 2021 and have come down since. Two things matter more than the exact cut-off. First, NRR under 100% means the business is running to stand still: every new sale is partly replacing revenue that walked out. Second, high NRR with low GRR (say 115% and 80%) means a few large accounts are expanding hard while many small ones leave, which is fragile in a way the headline hides. Report both.
NRR has exactly four levers, and they are the four terms in the formula: keep churn down, keep downgrades down, grow expansion, and price well. Of the four, churn is the one where the money is most often lost without a decision: a card that failed and was never fixed, an account that went quiet and nobody noticed until renewal. That is the part retention software exists to catch, and it is the part a spreadsheet cannot. The NRR calculator runs the formula on your own numbers and shows how much of the churn term was involuntary.
Net revenue retention (NRR) is the recurring revenue a cohort of existing customers generates at the end of a period, as a percentage of what that same cohort generated at the start, after adding their expansion and subtracting their downgrades and cancellations. NRR of 110% means the customers you had a year ago now pay 10% more in total, with no new customers counted. It is the single number that says whether a SaaS business grows without selling.
Yes. Net revenue retention includes churn as a subtraction: the recurring revenue of customers who cancelled during the period comes off the cohort's total, alongside downgrades. That is what makes it net. Gross revenue retention also subtracts churn and downgrades but does not add expansion back, which is why GRR can never exceed 100% and NRR can.
No. Net revenue retention never includes new customers. It is measured on a fixed cohort: the customers who were paying at the start of the period. Revenue from anyone acquired after that date is excluded entirely. Including new customers in the numerator is the most common way NRR gets inflated, and the resulting figure is really revenue growth, not retention.
Yes. Net revenue retention includes price increases, because a price increase raises the recurring revenue of an existing customer and that is exactly what the numerator measures. Whether it should be counted as expansion is a reporting-honesty question: an investor comparing NRR across companies will want to know how much of a 115% figure is customers buying more versus the same customers paying more for the same thing.
Yes. Net revenue retention is over 100% whenever expansion revenue from existing customers exceeds what was lost to cancellations and downgrades in the same period. Net revenue retention above 100% means the customer base grows in revenue terms even with zero new sales. Gross revenue retention cannot exceed 100%, because it counts losses only.
A good NRR for SaaS depends on the customer segment. For enterprise and mid-market SaaS, above 110% is good and above 120% is top decile; the best-known public SaaS companies have reported figures in the 120-130% range at their peak. For SMB and self-serve SaaS, above 100% is good because small customers churn more and expand less. Below 100% means the existing base is shrinking and every new sale is partly replacing lost revenue.
Net revenue retention and net dollar retention are the same metric under two names: the change in recurring revenue from a fixed cohort of existing customers, including expansion, downgrades and churn. Public companies more often say net dollar retention or dollar-based net retention; private SaaS and investors more often say NRR. When comparing figures, check the period (trailing twelve months versus annual cohort) and whether the company disclosed what counts as expansion.
Net revenue retention is calculated as (starting recurring revenue + expansion - contraction - churned revenue) divided by starting recurring revenue, measured on one cohort over one period, usually twelve months. Starting revenue is the cohort's MRR or ARR on day one; expansion is upgrades, seats and price increases from those same customers; contraction is their downgrades; churned revenue is what the ones who cancelled were paying.
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