What NRR should a genuinely best-in-class company target in my segment?

The good, better, best NRR bands (100, 110, 120 plus) that boards actually benchmark against, sitting alongside the efficiency metrics they get judged with.

State of the Cloud 2023

From Bessemer Venture Partners by Kent Bennett, Talia Goldberg, Mike Droesch and others report

• CAC payback benchmark: 12 to 18 months is good, 6 to 12 is better, 0 to 6 is best.
• Public cloud market capitalisation peaked at 2.7 trillion dollars in November 2021.
• Around 50 new Centaurs (100 million dollars of ARR) were minted in 2022, short of the roughly 70 predicted.
• Growth is again worth about twice a point of free cash flow margin, after the two traded one for one in late 2022.

The benchmark study everyone quotes: good and great net revenue retention by business type, built from 20 growth experts plus real public company numbers. It stops the 'is 105 percent good' argument in one page.

What is good retention?

From Lenny's Newsletter by Lenny Rachitsky 15 min read

• Benchmarks differ by business type, so compare yourself only to your own category.
• Enterprise SaaS net revenue retention: about 110 percent is good, about 130 percent is great.
• Bottom-up SaaS: 100 percent revenue retention is good and 120 percent great, with Slack at 135 to 155 percent.
• Warns startups rarely move retention much after launch, so weak early numbers are a hard signal.

Kellogg's argument that churn has too many definitions to be trustworthy, and that private companies should measure NDR the way public ones do. The slides are the reference deck for this debate.

Churn is Dead, Long Live Net Dollar Retention

From Kellblog by Dave Kellogg 10 min read plus slides

• Argues net dollar retention beats LTV/CAC because churn has too many definitions and invites gaming.
• Notes PE firms recalculate all your metrics anyway, so use the measure public markets already trust.
• Suggests private SaaS companies also start tracking remaining performance obligation (RPO).

The formula written out term by term, with the three performance bands. The right first read if you have been nodding along in NRR conversations without being sure of the calculation.

Net revenue retention (NRR): What is NRR and why does it matter for SaaS businesses?

From Stripe 9 min read

• NRR = (beginning recurring revenue minus churn minus downgrades plus upgrades) divided by beginning recurring revenue, times 100.
• Reading the number: above 100 percent is healthy, 80 to 100 percent needs work, under 80 percent is weak.
• Acquiring a customer costs 5 to 25 times more than keeping one, and a 5 percent retention gain lifts profit 25 to 95 percent.

Fresher than the Bessemer bands and cut by segment, so you can see where your kind of company actually sits rather than where software in general sits. It also reports gross retention alongside net, which is the pairing this question insists on.

2025 SaaS benchmarks on retention and AI: How does your company compare?

On ChurnZero 59 min