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)
ƒ 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: Oct 12, 2022

Latest update: Jan 27, 2023

Date created: Oct 12, 2022

Latest update: Oct 12, 2022