Net Revenue Retention (NRR)

Net Revenue Retention shows how revenue from existing customers develops over time. It takes into account upsells to existing customers as well as revenue losses from cancellations and downgrades. A value above 100 percent means that existing customers generate more revenue even without new customers.

It is calculated by comparing the recurring revenue of a customer cohort at the start of a period with the revenue of those same customers at the end, including expansion, price increases, downgrades and cancellations, but expressly excluding new customers. That separation is what makes the metric meaningful, because it measures the quality of the existing business independently of sales performance. A value of 120 percent means the company would grow even if it won no new customers at all, which substantially reduces the capital growth requires. Values below 100 percent conversely mean that every new customer must first offset losses in the base before any growth occurs. The view should be supplemented by gross retention, which excludes expansion and therefore shows how much revenue is actually lost. A good net figure can conceal high churn if a few large customers expand strongly.

A breakdown by customer size and segment, and by cohort over several years, is therefore advisable. It differs from the gross rate in that expansion can offset losses, so the gross rate never exceeds 100 percent while the net rate can. Among enterprise software vendors, readings well above 100 percent are taken as a sign that the product grows with the customer, while readings below 100 percent mean new customer acquisition alone has to make up for the base.