Net Revenue Retention vs Gross Revenue Retention – What You Need to Know
For any SaaS business, keeping customers and growing revenue from them is key. Two important metrics to help you understand this are Net Revenue Retention (NRR) and Gross Revenue Retention (GRR).
While they both measure how your revenue from existing customers changes, they each tell a different part of the story. Knowing how to use them together will give you a clearer picture of your business health.
What Is Gross Revenue Retention (GRR)?
Gross Revenue Retention focuses on how much of your current recurring revenue you keep over time without considering any additional sales to those customers.
It looks only at losses—revenue lost because customers cancel or downgrade their subscriptions. GRR tells you how sticky your current customer base is.
Why GRR matters: A high GRR means your customers are staying and not cutting back. It’s a direct indicator of how well your product and support keep customers satisfied.
How to Calculate GRR
Take your recurring revenue at the start of a period, subtract any revenue lost from churn or downgrades, then divide by the starting revenue.
For example, if you start with $100,000 in monthly recurring revenue (MRR), and lose $12,000 due to cancellations and downgrades, your GRR is 88%.
What Is Net Revenue Retention (NRR)?
Net Revenue Retention builds on GRR but adds another piece: expansion revenue.
NRR accounts for revenue gained when customers upgrade, buy add-ons, or otherwise increase their spend. This gives a fuller view of your customer base’s value over time.
Why NRR matters: It shows whether your customers are not just staying, but also growing their investment in your product. NRR over 100% means your revenue from existing customers is actually increasing.
How to Calculate NRR
Start with your beginning MRR, add expansion revenue, subtract churn and downgrades, then divide by the starting MRR.
Using the previous example, if you gained $8,000 from upgrades, your NRR would be:
NRR = (100,000 + 8,000 – 12,000) ÷ 100,000 = 96%
This means overall your existing customers’ revenue dropped only 4%, after factoring in growth.
Why Both Metrics Are Important
GRR gives you a straightforward look at how well you hold onto revenue without any upsells. It highlights customer satisfaction and the effectiveness of retention efforts.
NRR gives you the full picture by including revenue growth from existing customers. It tells you if your customer base is expanding or shrinking in value.
Both are crucial for understanding how your business grows sustainably.
What Are Good Benchmarks?
- GRR of 85% or higher indicates solid customer retention.
- NRR over 100% means your business is growing through existing customers.
If your GRR is low, focus on reducing churn and preventing downgrades. If your NRR is below 100%, explore ways to encourage upgrades and cross-sells.
How to Improve Retention Metrics
- Make onboarding smooth and helpful so customers see value fast.
- Provide excellent support to keep customers satisfied.
- Regularly communicate benefits and new features to encourage upgrades.
- Identify and engage customers at risk of downgrading or cancelling early.
Final Thoughts
Net Revenue Retention and Gross Revenue Retention are both essential metrics for SaaS companies. GRR shows how well you hold onto your revenue base, while NRR reveals whether that base is growing or shrinking.
By tracking and improving both, you create a more stable and scalable business.
