Gross Revenue Retention Rate
What is Gross Revenue Retention Rate?
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.Alternate names: Gross Dollar Retention Rate, Gross MRR Retention Rate
How to calculate Gross Revenue Retention Rate
What is a good Gross Revenue Retention Rate benchmark?
The maximum possible value for Gross Revenue Retention Rate is 100%. Across all SaaS companies, the median Gross Retention Rate is ~90%. For SaaS companies selling into small and medium businesses (SMBs), a good Gross Retention Rate is 80%. For Enterprise SaaS, 90% is considered a good Gross Retention Rate. For very high Annual Contract Value (ACV) products, Enterprise SaaS companies should benchmark themselves to 95%.
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. GRR = = ($200,000 - ($500 x 2) - $2,000) / $200,000 = $197,000 / $200,000 = 98.5% expressed monthly
More about this metric
Retaining customers is key for operating a healthy and profitable business. A high Gross Retention Rate is an indication that your offering represents a strong value proposition for your customers. This is sometimes referred to as having a “sticky” product.
Maximizing your Gross Retention Rate is also an important component of profitability. Acquiring a new customer can be 5 - 25 times more costly than retaining an existing customer. By retaining your existing customers, you reduce your Customer Acquisition Cost (CAC), therefore increasing your profitability.
While you want your Gross Retention Rate to be as high as possible, the maximum is 100%, and even that is virtually unattainable after a few years in business. Some churn is simply unavoidable, but this can be a smaller percentage that you might think. Companies should analyze the reasons behind all churn, and segment into what is truly avoidable versus what could be avoided if concrete actions were taken in the future. Then take steps to implement those actions. For example, mature and proactive Customer Success practices have been proven to increase Gross Revenue Retention.
For a comprehensive understanding of retention, it’s important to track both the percentage of all customers who renew or cancel contracts, measured by logo churn, and the percentage of all revenue dollars under contract which renew.
Additional Gross Revenue Retention Rate recommended resourcesLincoln Murphy debunks the myth of unavoidable churn.
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Gross MRR Churn Rate
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