Article · 9 min read

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

Stripe Free Beginner

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.

  • 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.
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It answers 4 questions

  1. What is net revenue retention and why does every investor keep asking me for it?
  2. What is the difference between gross retention and net retention, and which one should I watch?
  3. How do I forecast renewals so the number is actually believable?
  4. What NRR should a genuinely best-in-class company target in my segment?

Read with it

  1. The good, better, best NRR bands (100, 110, 120 plus) that boards actually benchmark against, sitting alongside the efficiency... Bessemer Venture Partners Report · report State of the Cloud 2023 Kent Bennett, Talia Goldberg, Mike Droesch and others
  2. The benchmark study everyone quotes: good and great net revenue retention by business type, built from 20 growth experts plus... Lenny's Newsletter Newsletter · 15 min read What is good retention? Lenny Rachitsky
  3. Kellogg's argument that churn has too many definitions to be trustworthy, and that private companies should measure NDR the way... Kellblog Essay · 10 min read plus slides Churn is Dead, Long Live Net Dollar Retention Dave Kellogg
  4. The cleanest definition of expansion MRR with the formula and the benchmark that matters: top companies get up to 40 percent of... Chargebee Article · 7 min read Expansion MRR: Definition, Formula, and Impact on SaaS Growth Chargebee
  5. The most complete breakdown of what goes into a health score: which four to six categories to weight, how to segment scores by... Gainsight Article · 12 min read Customer Health Score Explained: Metrics, Models and Tools Gainsight
  6. A real public company's internal renewal process, published rather than described. You can copy the structure instead of... The GitLab Handbook Article · reference Customer Renewal Tracking The GitLab Handbook
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