Net Revenue Retention (NRR)
Net Revenue Retention (NRR) is the percentage of recurring revenue a company keeps from an existing group of customers over a period, after adding expansion revenue and subtracting downgrades and cancellations. Revenue from new customers is left out. An NRR above 100% means the existing customer base is growing revenue on its own, even if no new customer signs up.
How Net Revenue Retention Works
NRR starts with the recurring revenue from customers who were already paying at the start of a period, usually measured as Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR). It then follows that same group to the end of the period and records three movements:
- Expansion: upgrades, extra seats, add-ons, cross-sells or higher usage.
- Contraction: downgrades, fewer seats or lower usage.
- Churn: revenue lost when customers cancel.
The standard formula is:
NRR = (Starting MRR + Expansion MRR - Contraction MRR - Churned MRR) / Starting MRR x 100
Revenue from customers acquired during the period is excluded, which is what makes NRR a clean read on the existing base. Teams calculate it monthly, quarterly or annually. Pick one window and keep it, because a monthly figure and an annual figure are not interchangeable. Some analytics tools also count reactivation revenue from returning customers, so check the definition before comparing numbers across tools or companies.
Why Net Revenue Retention Matters
NRR shows whether customers get more value from a product over time or quietly drift away. Above 100%, the base compounds: revenue grows before any new deal closes, so acquisition adds to growth instead of replacing losses. Below 100%, the company must win new business just to stand still.
Stripe describes NRR over 100% as healthy, 80% to 100% as adequate retention with limited expansion, and below 80% as low. Treat these as rough guides, since healthy levels differ by customer size and pricing model.
For product teams, NRR links product decisions to revenue. A pricing model with room to grow, features that pull more teammates in, and fewer reasons to downgrade all show up here as expansion revenue or avoided losses. NRR should still be read next to churn: a strong NRR can hide many small customers leaving if a few large accounts expand.
Net Revenue Retention Example
A B2B analytics tool starts the quarter with $100,000 in MRR from existing customers. During the quarter:
- Customers add seats and upgrade plans worth $12,000 in new MRR.
- Some customers downgrade, removing $3,000.
- A few customers cancel, removing $5,000.
NRR = (100,000 + 12,000 - 3,000 - 5,000) / 100,000 = 104%. Revenue from customers who signed up during the quarter is not counted. The team sees healthy growth from the base, but the $8,000 in losses still deserves a look, starting with why those accounts downgraded or left.
To connect movements like these back to the work that caused them, see how product teams tie shipped features to revenue outcomes.
Net Revenue Retention vs. Gross Revenue Retention
Gross Revenue Retention (GRR) uses the same starting revenue but ignores expansion, so it only subtracts contraction and churn and can never exceed 100%. GRR shows how well a company keeps what it already has. NRR shows whether the base grows overall. Reading both stops strong upsell numbers from masking a retention problem: a business with 110% NRR and 80% GRR depends heavily on a few expanding accounts.