NRR (Net Revenue Retention)
Top-quartile SaaS companies have NRR >120%. NRR below 100% means you're shrinking even with new sales—a red flag for SMBs with limited acquisition budgets (KeyBanc 2024).
💡TL;DR
NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR. Also called NDR (Net Dollar Retention). Best-in-class: >120%. Healthy: 100-120%. Concerning: <100%. NRR >100% is the "holy grail"—it means existing customers generate growth without new sales. SMBs often have lower NRR (90-110%) due to higher SMB customer churn. Focus on expansion to offset.
Definition
The percentage of recurring revenue retained from existing customers after accounting for expansion, contraction, and churn. NRR = (Starting MRR + Expansion - Contraction - Churn) ÷ Starting MRR × 100. NRR >100% means you grow even without new customers.
🏢What This Means for SMB Teams
SMB-focused SaaS often sees NRR 90-105% due to higher SMB customer churn. Combat this with usage-based pricing that expands with customer growth, or tiered plans that encourage upgrades.
Track MRR, churn, CAC payback—AI acts when metrics slip.
Metrics that matter, actions that move them.
📋Practical Example
A 35-person HR tech SaaS had NRR of 94%—losing 6% of revenue annually from existing customers. They launched a "success tier" with advanced analytics at 40% premium. CSM team proactively pitched upgrades when customers hit usage thresholds. After 6 months, expansion revenue tripled, NRR rose to 108%, effectively adding $420k ARR without new customer acquisition.
🔧Implementation Steps
- 1
Calculate NRR monthly using cohort starting MRR as denominator.
- 2
Break down NRR components: Gross Retention (before expansion) vs. Net Retention.
- 3
Identify expansion triggers (usage thresholds, seat additions, feature requests).
- 4
Set CSM targets on NRR contribution, not just retention.
- 5
Report NRR by customer segment (enterprise vs. SMB) to spot patterns.
❓Frequently Asked Questions
What's the difference between GRR and NRR?
GRR (Gross Revenue Retention) excludes expansion—it only measures churn and contraction. NRR includes expansion. GRR shows "how leaky is our bucket?" NRR shows "are we growing from existing customers?" Both matter: low GRR with high NRR means you're over-relying on upsells.
How often should I measure NRR?
Monthly for operational tracking, quarterly for board reporting. Use trailing 12-month NRR to smooth seasonality. For early-stage with few customers, quarterly may be more meaningful than monthly.
⚡How Optifai Uses This
Optifai calculates NRR automatically and identifies at-risk accounts dragging down retention. Expansion signals trigger proactive upsell workflows, while churn risk signals alert CSMs before cancellation.
📚References
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Related Terms
MRR (Monthly Recurring Revenue)
The predictable revenue a SaaS company expects to receive every month from active subscriptions. MRR = Sum of (customers × monthly subscription price). It normalizes annual and monthly contracts into a single metric for tracking growth velocity.
Churn Risk Signals
Behavioral indicators that predict customer churn before it happens. Common signals include: declining login frequency, reduced feature usage, support ticket spikes, NPS score drops, billing page visits, and engagement with competitor content. Early detection enables proactive intervention.
Expansion Playbooks
Documented, repeatable sequences for upselling existing customers to higher tiers or cross-selling additional products. Includes trigger conditions, talk tracks, objection handling, and success metrics. Expansion playbooks systematize what top performers do naturally.
Customer Retention
The ability of a company to keep its customers over time, measured as retention rate (percentage of customers who continue doing business over a period).