What is net revenue retention (NRR)?
Net revenue retention (NRR; also referred to as net dollar retention) refers to the percentage of recurring revenue generated and retained by a business from its existing customers over a set period of time. This includes expansion revenue, such as upsells and cross-sells. Typically, it is calculated on an annual or monthly basis. Along with monthly recurring revenue (MRR), customer lifetime value (LTV), average order value (AOV), and customer churn, net revenue retention rate is a key performance indicator for businesses that are fueled by recurring revenue (e.g. those following the SaaS business model, as well as curated subscription boxes and more). To calculate net revenue retention, divide the recurring revenue (including expansion) generated at the end of a period by the recurring revenue at the start of that same period.
NRR vs gross revenue retention, customer retention & revenue churn
Net revenue retention is distinct from gross revenue retention, as the latter measures revenue that is retained from a business’s existing customer base over a set period without factoring in revenue expansion. It is also distinct from customer retention, which tracks the retention of a business’s existing customers, rather than how much they spend. However, both are important metrics to track when it comes to determining customer success and satisfaction with your business and products. Revenue churn, meanwhile, represents the total revenue lost by a business due to customers canceling.