How to use the net revenue retention calculator
- Enter the recurring revenue at the start of the period from customers who were already paying.
- Enter the expansion, contraction and churned revenue from those same customers during the period.
- Choose the length of the period. For a month or quarter you also get the yearly figure if that rate repeated.
- Read net revenue retention (NRR) and gross revenue retention (GRR).
Formula
NRR = (starting revenue + expansion - contraction - churn) / starting revenue x 100%
GRR = (starting revenue - contraction - churn) / starting revenue x 100%
Yearly figure = (NRR / 100)^periods per year x 100%, using 12 for months and 4 for quarters
Revenue from customers who joined during the period is left out of both figures.
$10,000 of starting revenue in a month
A business starts the month with $10,000 of recurring revenue. Existing customers add $1,500 in expansion, downgrade by $200 and cancel $500 worth. NRR is ($10,000 + $1,500 - $200 - $500) / $10,000 = 108%, and GRR is ($10,000 - $200 - $500) / $10,000 = 93%.
The same customers now pay $10,800. If 108% repeated every month for a year it would compound to 251.82%, which shows why a monthly figure is hard to project. With only quarterly figures, a 108% quarter compounds to 136.05% over four quarters.
NRR and GRR together
GRR shows how much revenue you hold on to without counting any growth, so it can never be more than 100%. NRR adds expansion back in, so it can pass 100% when existing customers grow enough to cover those who left. Looking at both shows whether growth comes from keeping customers or from selling them more.
The gap between the two is the expansion. A business can have a high NRR and a weak GRR if a few customers expand a lot while many leave.
Definitions differ
Companies define expansion, contraction and the measurement window in different ways, for example whether price increases count and whether the period is trailing twelve months. Use the same definitions each time so the trend is meaningful, and note that the repeated period figure assumes every period looks the same, which is rare.
For customer counts and churn percentages use the churn rate calculator. To see what a customer is worth, use the customer lifetime value calculator, and compare it with spending using the customer acquisition cost calculator and the CAC payback period calculator.
Assumptions and limits
- Starting revenue and all changes come from the same group of customers who existed at the start.
- Expansion, contraction and churn are amounts you total yourself from your records.
- Contraction plus churn cannot exceed the starting revenue.
- The yearly figure assumes the period's rate repeats exactly, which is an illustration only.
Frequently asked questions
How do you calculate net revenue retention?
Add expansion to starting revenue, subtract contraction and churn, then divide by starting revenue. The example gives 108%.
What is the difference between NRR and GRR?
GRR leaves out expansion, so it measures only revenue kept and cannot exceed 100%. NRR includes expansion and can be above 100%.
Do new customers count?
No. Only revenue from customers who were paying at the start of the period is included in either measure.
Why show a yearly figure for a monthly result?
It compounds the period's rate over a year to show what repeating it would mean. Real months vary, so use it only as an illustration.