Net Revenue Retention
The percentage of opening contracted revenue you keep from existing customers over a period, after churn and downgrades and after adding upsells.
◆ Percentage
Formula
Built from
What it measures
The net dollar movement in your existing customers' contracted revenue over a period — churn and downgrades pulling down, upsells and price increases pushing up — expressed as a percentage of where that base started. New customers are excluded entirely. NRR above 100% means the base you already had grew on its own; below 100% means it shrank.
Why it matters
NRR separates the health of your existing base from new sales. When your board sees ARR up 50%, the first question is "how much is expansion versus new logos?" — and NRR answers it. It is dollar-weighted, so losing one $100K customer hurts it far more than losing ten $1K customers, which is exactly the signal you want. Finance uses it to model retention risk and forecast; CS and product live by it because it is the cleanest proxy for delivered value. High NRR is the compounding engine behind land-and-expand businesses: you grow even if you stop acquiring.
How to read it
Read NRR as a trend, not a snapshot, and always alongside Gross Revenue Retention. NRR of 110% means your base grew 10% from existing customers alone; 100% is flat; below 100% is shrinking. The gap between NRR and GRR is your net expansion — if NRR is 110% but GRR is 85%, upsells are masking a base that's leaking 15%, and you need to fix retention even while the headline looks healthy. Watch the month-over-month direction: an NRR of 110% that was 118% last month is decelerating expansion or accelerating churn, regardless of how good the absolute number reads.
What good looks like
Good
NRR comfortably above 100% — your existing base is expanding faster than it churns, so you grow even before new sales. A sign of strong product-market fit and a working land-and-expand motion.
Watch
NRR hovering just above 100% — the base is growing only modestly. Check whether upsell velocity is slowing, churn is creeping up, or you're landing lower-value segments before the cushion disappears.
Bad
NRR below 100% — the existing base is shrinking and new bookings are masking a leaky bucket. Unsustainable; dig into churn root causes and downsell patterns immediately.
Watch-outs
- Reading NRR without GRR. A 110% NRR can sit on top of a 75% GRR, meaning a quarter of the base is leaving and only heavy upsell is hiding it. Always split NRR into GRR plus net expansion before you call retention healthy.
- Treating the absolute number as the signal. NRR of 110% this month versus 118% last month is a decline that the headline flatters — expansion is decelerating or churn is accelerating. Track the month-over-month trend obsessively.
- Ignoring customer concentration. One whale's $5M upsell can lift NRR to 120% while quietly making that account 40% of your base. Segment NRR by cohort, size, and territory so a single contract doesn't disguise rising concentration risk.
- Counting new-logo revenue in the numerator. NRR is existing customers only; if a new customer's CARR leaks into upsell, you inflate retention and lose the ability to separate base health from acquisition.
Worked example
Hypothetical
You open June with $1M in CARR. During June two customers churn for $150K total, one downgrades from premium to standard losing $50K, and two upgrade their plans for $200K. Net retention is ($1M + $200K − $50K − $150K) ÷ $1M = $1M ÷ $1M = 100% — expansion exactly offset the losses, so the base is flat. Had those upsells been only $80K, NRR would be $880K ÷ $1M = 88%, signaling real base erosion.
Variants & windows
The same metric re-expressed by a mechanical transform — a trailing window, a growth rate, a per-unit scaling, or a book/segment cut. Each is computed from Net Revenue Retention above.
- NRC (MOM) Alternate cut of the parent metric
- NRC (T3M) Trailing 3-month
- NRC (TTM) Trailing 12-month