NRR (Net Revenue Retention)
Definition
NRR (Net Revenue Retention), also called Net Dollar Retention (NDR), measures the percentage of revenue retained over a given period within a cohort of existing customers, after accounting for expansions, contractions, and churn. This metric reveals a company's ability to grow from its existing customer base, independently of new acquisitions. An NRR above 100% means expansion revenue exceeds losses from churn, generating organic growth without acquiring new customers.
NRR calculation and formula
NRR is calculated using the formula: (initial MRR + expansion - contraction - churn) / initial MRR × 100. Expansion includes upgrades, upsells, and cross-sells. Contraction represents downgrades and license reductions. Churn accounts for lost customers. For example, with an initial MRR of €100K, +€20K expansion, -€5K contraction and -€10K churn, the NRR is 105% — the company grows by 5% on its existing base before any new acquisition.
Interpretation and benchmarks
NRR benchmarks vary by market segment. In enterprise SaaS, an NRR above 120% is considered excellent, reflecting strong expansion potential within large accounts. In SMB, an NRR of 90–100% is acceptable given structurally higher churn. The top publicly traded SaaS companies report NRRs of 130% or more. An NRR below 100% indicates a shrinking customer base, requiring constant acquisition to maintain revenue.
NRR vs GRR
GRR (Gross Revenue Retention) measures retention excluding expansions: (starting MRR - contractions - churn) / starting MRR. GRR can never exceed 100%. Comparing NRR/GRR reveals business dynamics: a large gap indicates strong expansion capacity but also potentially high churn masked by upsells. A low GRR with a high NRR can indicate a fragile model that depends on expansion to offset customer departures.
Levers to improve NRR
Improving NRR requires activating several levers. Reduce churn through solid onboarding, proactive Customer Success, and early detection of attrition signals. Drive expansion by identifying upsell opportunities, continuously demonstrating value, and creating natural paths to higher-tier offerings. Minimize contractions by promptly addressing satisfaction issues and offering alternatives to downgrades. Alignment between Product, CS and Sales around NRR ensures a coordinated approach.
Impact on valuation
NRR strongly influences the valuation of SaaS companies. Investors favor models with a high NRR because they deliver predictable, capital-efficient growth. A company with 120% NRR can sustain double-digit growth even with modest customer acquisition. According to market analyses, publicly traded SaaS companies with NRR above 120% trade at multiples 25% higher than those with NRR below 100%. This metric has become a key indicator in investment due diligence.
Operational NRR Monitoring
Monitoring NRR requires a robust data infrastructure. RevOps must track MRR movements by category (new, expansion, contraction, churn) and by cohort. Segment analysis (account size, industry, product) identifies where NRR is performing or underperforming. Leading indicators (product engagement, NPS, feature usage) predict future NRR trends. Real-time dashboards enable CS teams to prioritize their actions on at-risk accounts or accounts with high expansion potential.
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