How to Calculate Net Revenue Retention (NRR)
Net Revenue Retention (also called Net Dollar Retention or NDR) measures revenue growth from existing customers, including expansion, contraction, and churn. It's one of the most important SaaS metrics and a key driver of company valuation.
The NRR Formula
NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR × 100
Measures revenue retention including expansion revenue
Step-by-Step Calculation
Step 1: Identify Starting MRR
Use MRR from existing customers at the beginning of the period. Exclude new customers acquired during the period.
Step 2: Track Revenue Changes
- Expansion MRR: Upsells, cross-sells, add-ons from existing customers
- Contraction MRR: Downgrades, reduced seats, plan changes
- Churned MRR: Revenue from customers who cancelled completely
Step 3: Calculate Ending MRR
Ending MRR = Starting MRR + Expansion - Contraction - Churn
Step 4: Calculate NRR
Example Calculation
- Starting MRR: $100,000
- Expansion MRR: $12,000 (upsells)
- Contraction MRR: $3,000 (downgrades)
- Churned MRR: $5,000 (cancellations)
- Ending MRR: $100,000 + $12,000 - $3,000 - $5,000 = $104,000
- NRR: ($104,000 / $100,000) × 100 = 104%
NRR Benchmarks by Company Stage
| Rating | NRR Range | Interpretation |
|---|---|---|
| World-Class | 120%+ | Exceptional expansion, minimal churn |
| Excellent | 110-120% | Strong expansion engine |
| Good | 100-110% | Expansion offsets churn |
| Acceptable | 90-100% | Some net revenue leakage |
| Problem | Below 90% | Significant revenue churn |
Famous SaaS Company NRR Examples
| Company | NRR | Strategy |
|---|---|---|
| Snowflake | 158% | Usage-based pricing, data growth |
| Datadog | 130% | Multi-product expansion |
| Monday.com | 130% | Seat expansion, workflow growth |
| Twilio | 137% | Usage-based, API expansion |
| Zoom | 130% | Land-and-expand, viral growth |
Strategies to Improve NRR
1. Build Expansion Revenue Engines
- Implement usage-based pricing that grows with customers
- Create tiered pricing with clear upgrade paths
- Build multi-product portfolio for cross-sells
- Design seat-based expansion models
- Offer premium features and add-ons
2. Reduce Revenue Churn
- Improve onboarding to prevent early churn
- Implement proactive customer success programs
- Identify and address at-risk customers early
- Build product stickiness and lock-in
- Offer annual contracts with discounts
3. Minimize Contraction
- Make downgrades harder than upgrades
- Provide pause options vs cancellation
- Offer targeted discounts to prevent downgrades
- Build features that justify current tier
- Regularly communicate value delivered
4. Implement Land-and-Expand Motion
- Start customers on entry-level plans
- Demonstrate value quickly
- Identify expansion triggers (usage, team growth)
- Proactive outreach when expansion signals appear
- Make upgrades self-serve when possible