Description
Gross Revenue Retention (GRR) is a metric that shows the rate of recurring revenue that a company has managed to retain from existing customers within a defined period. This metric takes into account downgrades and cancellations but does not include any expansion revenue. GRR is expressed as a percentage and it is also known as Gross Renewal Rate.
Example
GRR = (Total Revenue – Churn) / Total Revenue. Suppose Vareto has 10 clients, each of which pays $1,000 toward a subscription. Out of these, 2 clients cancel the subscription. Thus, GRR is ($10,000 - $2,000) / $10,000 = 80%.
Why it matters
Gross revenue retention must be used alongside net revenue retention to evaluate a company's business strategy. If net revenue retention is high but gross revenue retention is low, the business may be having trouble attracting customer interest. Investors may not be willing to commit to a business with a low GRR as they do not consider it a viable investment. A typical benchmark value for SaaS companies is a GRR of ~90%.