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Net Revenue Retention Rate

Net Revenue Retention (NRR) Rate, also known as Net Dollar Retention, is a crucial customer success key performance indicator (KPI) to measure the overall performance of a SaaS business. NRR is the percentage of recurring revenue retained from existing customers. It considers income from upgrades, cross-sales, and revenue churns like ​​expirations, cancellations, or downgrades.

NRR measures the overall impact of the revenue generated by existing customers on a company's financial health. It also offers an inkling of how well-equipped your business is in retaining and renewing existing customers and how good it is at generating additional revenue from the same customer base.

NRR is critical to help companies understand how their churn rate impacts the overall revenue generation. Churn rate is the percentage of subscriptions a business loses over a specific time period. It indicates the rate at which customers stop doing business with your company—canceled or downgraded their subscription. An ideal NRR ranges between 90% to 125%, depending on the target customer size.

Net Revenue Retention Rate Formula

NRR = (Revenue retention (RR) at the beginning of the period + Upgraded RR at the beginning of the period + Upsells - Downgraded RR at the beginning of the period - Canceled RR at the beginning of the period) / RR at the beginning of the period

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