What is the difference?

# Net Revenue Retention Rate vs Gross Revenue Retention Rate

Net Revenue Retention Rate

Gross Revenue Retention 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.

Gross Revenue Retention (GRR) Rate is the percentage of recurring revenue retained from existing customers in a defined time period, including downgrades, and cancels. It does not include any expansion revenue. GRR is also commonly referred to as Gross Renewal 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) Sum(renewing customers RR) / Sum(RR of customers due to renew)
ƒ Sum(RR (recurring revenue) at the beginning of the period - downgraded RR during the period - cancelled RR during the period) / (RR at the beginning of the period)

#### 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 has 100 customers, each paying \$2,000 per month. MRR at the beginning of the month is \$200,000. Within the month, 2 customers downgrade by \$500 each, and 1 customer cancels. Applying the Gross Retention formula, we get (\$200,000 - (\$500 x 2) - \$2,000) / \$200,000 = \$197,000 / \$200,000 = 98.5% GRR expressed monthly

#### Published and updated dates

Date created: Apr 28, 2018

Latest update: Jan 4, 2022

Date created: Jul 29, 2020

Latest update: Jan 14, 2022