Net revenue retention (NRR)
NRR is ending recurring contracted value for a starting cohort divided by that cohort’s starting recurring contracted value, after churn, contraction, and expansion and excluding new customers.
The formula is straightforward and the definitional choices are not. Is the cohort defined by customer or contract? Which recurring contracted-value basis is used? Are one-time services excluded? How is a customer who exits and returns treated? Two companies quoting the same NRR may be computing materially different measures.
NRR summarizes several post-sale commercial movements in one number. Report the starting value, churn, contraction, expansion, ending value, cohort rule, period, and exclusions so concentration or offsetting movements remain visible. NRR is a management measure, not an accounting revenue-recognition rule or a causal explanation.
Where it breaks
NRR is reported without gross retention alongside it, so expansion in a few large accounts masks broad churn.
Related terms
- Gross revenue retention (GRR)
- GRR measures how much starting recurring contracted value remains after churn and contraction, before expansion; under that definition it is capped at 100%.
- Churn
- Churn is the loss of a customer or of their revenue, and it must be measured with a stated basis, logo or revenue, and a stated recognition point.
- Expansion revenue
- Expansion revenue is additional revenue from existing customers through seat growth, tier upgrade, usage increase or new product attachment.
- Cohort analysis
- Cohort analysis groups records by a shared start event and follows that fixed group over time, which is the only way to separate mix change from behavior change.
Field notes on this
- Read NRR with GRR
NRR can combine base retention with concentrated expansion. Pair it with GRR and a cohort bridge, then investigate the causes separately.