net revenue retention (NRR)

Also called: NRR, net dollar retention, NDR

Recurring revenue from the customers you had at the start of a period, including their upgrades, as a share of what they paid at the start; can exceed 100%.

NRR asks whether revenue from your existing customers grew or shrank over a period, counting everything that happened to them: cancellations, downgrades and upgrades.

$\text{NRR} = \frac{\text{start MRR} + \text{expansion} - \text{contraction} - \text{churned MRR}}{\text{start MRR}}$

Above 100% means upgrades and add-ons outweighed what you lost: the same customers pay more than before, even though some left. That is also called negative churn, because net revenue churn, 100% − NRR, falls below zero.

Only customers who were paying at the start count. Revenue from customers who joined during the period, including their upgrades, is new MRR; mixing it in inflates NRR.

NRR is always at least gross revenue retention (GRR), which leaves upgrades out. Reading the two together shows whether revenue is kept because customers stay (high GRR) or because the ones who stay buy more (NRR well above GRR). Annualising compounds: 101% a month is $1.01^{12} = 112.7\%$ a year, if every month is like that one.

Example

Start MRR $40,000; expansion $2,400, contraction $600, churned $1,400; new customers add $2,000.

NRR $= (40{,}000 + 2{,}400 - 600 - 1{,}400) / 40{,}000 = 101.0\%$ . The $2,000 from new customers is not in it: with it, the ratio would read 106%, which is MRR growth, not retention.

Common mistakes

Counting new customers' revenue. That turns NRR into MRR growth.
Adding monthly points to get a year. 101% a month is 112.7% a year by compounding, not 112%.
Reading high NRR as low churn. A few big upgrades can hide many cancellations; check GRR too.