Net revenue retention (NRR) answers one question: if you won no new customers at all, would revenue grow or shrink? Above 100% means your existing customers are spending more over time than you lose to downgrades and cancellations.
How it works
Start with the recurring revenue from a group of existing customers at the beginning of the period, usually a year or a month. Add what they expanded by, then subtract downgrades and cancellations.
Divide the result by the starting revenue to get NRR. Revenue from customers you won during the period is left out on purpose, so the number only reflects the customers you started with.
Gross revenue retention (GRR) ignores expansion. It only shows how much of the starting revenue you kept, so it can never go above 100%.
A worked example
Starting with $100,000 of MRR, customers upgrade by $12,000, downgrade by $3,000 and cancel $5,000. The same customers now bring in $104,000, which is 104% NRR. GRR is 92%, since $8,000 of the original revenue was lost.
Questions people ask
What is a good NRR?
Above 100% means you grow even without new customers. Businesses selling to larger companies often report higher NRR than those selling to small businesses, where cancellations are more common. Compare yourself with companies selling to similar customers.
Should I measure it monthly or yearly?
Annual NRR is the most commonly reported figure, because monthly numbers move around a lot. Use the same customer group from the start to the end of whichever period you choose.
How is this different from churn rate?
Churn usually counts customers or revenue lost. NRR combines those losses with expansion, so a business with noticeable churn can still have NRR above 100% if its remaining customers grow enough.