Net Revenue Retention Rate

Definition

Net Revenue Retention (NRR) Rate is the part of recurring revenue that a company manages to retain from existing customers during a period. This commonly includes expansion revenue, downgrades, and cancellations. This metric allows companies to get a complete view of customer retention changes. 90-125% is considered a good NDR depending on the target customer size.

Example

Net Revenue Retention Rate (NRR) = (Starting MRR + Expansion MRR – Contraction MRR – Churn MRR)/ Starting MRR x 100. Suppose a company has 100 customers who pay $20,000 annually. During a month, 10 customers are expected to renew but only 9 renew, 1 upgrade of $4000, and 2 downgrades of $2500 each. Thus, Net Dollar Retention = ($20,000 x 9) + $4,000 - ($2,500 x 2) / ($2,000 x 10) = $19,000 / $20,000 = 95%.

Why it matters

For any business, the more the number of retained customers, the healthier and more profitable the business will be. A high Net Retention Rate (NRR) indicates that the business is able to offer an attractive value proposition to customers.It tells how well a company can renew and add revenues from customers and thereby drive profitability.

Get Started

Ready to see Vareto in action?

Give your finance team the tools they deserve so your company can make better, faster operational decisions.

Request a demo