What is the difference?

# Net Revenue Retention Rate vs Net MRR Churn Rate

Net Revenue Retention Rate

Net MRR Churn Rate

#### What is it?

Net Revenue Retention (NRR) Rate, also known as Net Dollar Retention (NDR), is the percentage of recurring revenue retained from existing customers in a defined time period, including expansion revenue, downgrades, and cancels. This churn metric gives a comprehensive view of positive as well as negative changes with respect to customer retention. A good NDR can range between 90% to 125%, based on target customer size.

Net Monthly Recurring Revenue (MRR) Churn Rate is the percentage change in MRR due to expansions, cancellations and downgrades. A negative Net MRR Churn Rate occurs when expansions exceed downgrades and cancellations and is a strong positive indicator of company health. This metric is typically expressed as a monthly rate although it can also be an annual rate: Net Annual Recurring Revenue (ARR) Churn Rate.

#### Formula

ƒ Sum(RR (recurring revenue) at the beginning of the period + expansion RR during the period - downgraded RR during the period - cancelled RR during the period) / (RR at the beginning of the period)
ƒ Sum(renewing customers RR) / Sum(RR of customers due to renew)
ƒ Sum(downgraded MRR + cancelled MRR - expanded MRR) / (total MRR at the beginning of the month)

#### Example

Here's an example of how to calculate Net Revenue Retention (NRR). We'll call this scenario A: A company has 100 customers, each paying \$2,000 per month. MRR at the beginning of the month is \$200,000. Within the month, 1 customer adds a \$4,000 MRR upgrade, 2 downgrade by \$500 each, and 1 customer cancels. Based on the Net Dollar Retention formula, NRR = (\$200,000 + \$4,000 - (\$500 x 2) - \$2,000) / \$200,000 = \$201,000 / \$200,000 = 100.5% expressed monthly Now let's look at Scenario B: Another company has 100 customers paying \$20,000 for annual subscriptions. Within a one month period, 10 customers are due for renewal, only 9 actually renew, 1 adds a \$5000 ARR upgrade, and 2 downgrade their subscription by \$2000 each. Net Dollar Retention = (\$20,000 x 9) + \$5,000 - (\$2,000 x 2)) / (\$2,000 MRR x 10) = \$19,000 / \$20,000 = 95.0% expressed monthly

Example A: A company’s MRR is \$50,000 with expansions of \$7,000 and downgrades and cancellations of \$10,000. The Net MRR Churn Rate is (\$10,000 - \$7,000) / \$50,000 = 6.0% Example B: A company’s MRR is \$100,000 with expansions of \$12,000 and downgrades and cancellations of \$7,000. The Net MRR Churn Rate is (\$12,000 - \$7,000) / \$100,000 = -5.0%

#### Published and updated dates

Date created: Oct 12, 2022

Latest update: Jan 27, 2023

Date created: Oct 12, 2022

Latest update: Oct 12, 2022