What Is Net Revenue Retention (NRR)?
Growing a SaaS business is not just about signing new customers. It is also about keeping your current customers happy and helping them spend more over time. Net Revenue Retention (NRR) measures exactly that. It shows how much revenue you keep and grow from your existing customers.
If your NRR is strong, it means your customers find ongoing value in your product. This makes your revenue more stable and easier to grow.
What Does Net Revenue Retention Mean?
NRR tells you how your monthly or annual recurring revenue changes from the customers you already have. It takes into account three things:
- Revenue gained from upgrades or add-ons
- Revenue lost from customers downgrading their plans
- Revenue lost from customers cancelling (churn)
When NRR is over 100 percent, it means your current customers are spending more than before. When it is below 100 percent, you are losing revenue from your existing customers.
How to Calculate NRR
The formula is:
NRR = (Starting Revenue + Expansion Revenue – Contraction Revenue – Churned Revenue) ÷ Starting Revenue × 100
For example, if you start with $50,000 in recurring revenue, gain $8,000 from upgrades, lose $2,000 due to downgrades, and $3,000 from cancellations, then:
NRR = (50,000 + 8,000 – 2,000 – 3,000) ÷ 50,000 × 100 = 106%
This means your existing customers are worth 6 percent more than last month.
Why NRR Is Important for SaaS
NRR gives you a clear picture of how well your product satisfies and grows your current customer base. Here is why it matters:
- It shows if customers are sticking around and spending more
- It helps you grow revenue efficiently without always needing new customers
- It makes revenue forecasting more reliable
- Investors look at NRR to evaluate business health and growth potential
What Is a Good NRR?
Generally, you want your NRR to be:
- Above 110% for strong growth
- Around 100% to maintain steady revenue
- Below 100% means you are losing revenue from existing customers and need to take action
Enterprise SaaS companies usually have higher NRR because of upsells and long contracts. Smaller businesses may have lower NRR due to higher churn.
How to Improve Your NRR
- Make onboarding smooth so customers quickly see value
- Identify why customers leave and address those issues
- Offer relevant upgrades and add-ons that fit customer needs
- Reach out to customers at risk of downgrading before they do
- Build a customer success team focused on helping users get the most from your product
Final Thoughts
Net Revenue Retention is a vital metric for any SaaS business. It tells you if your existing customers are growing in value or if revenue is leaking away.
Tracking and improving NRR helps your business grow in a stable and efficient way. Focus on delivering ongoing value to customers and expanding your relationships with them.
