Net Revenue Retention (NRR) is one of the most important metrics for subscription-based businesses, especially in the SaaS world. It measures how much recurring revenue a company retains from its existing customers over time. But it doesn’t stop there—it also factors in upgrades, expansions, downgrades, and churn, giving you a true picture of how much revenue your current customers are generating.
Here’s the key: NRR only looks at your existing customer base. It excludes new customers entirely. So, it’s focused on what happens after a customer signs on—whether they stick around, spend more, or downgrade their service. In short, NRR shows whether your customer relationships are growing or shrinking.
Simply put, NRR is a direct indicator of your business’s health. It tells you if your customers are not only staying but also increasing their spending. The higher your NRR, the stronger your customer retention and expansion efforts are.
For top-performing companies, it’s common to see NRR exceed 100%. This means that existing customers are driving more revenue than they did initially—either by upgrading or adding new services. It’s a powerful sign that your product or service is delivering long-term value.
On the flip side, if your NRR is below 100%, it’s a warning sign. It means churn or downgrades are eating into your revenue. Customers are leaving or spending less, which puts pressure on your growth. For SaaS companies, especially, keeping NRR above 100% is crucial to sustainable growth.
NRR is often confused with Gross Revenue Retention (GRR), but they measure different things. While NRR factors in upgrades, expansions, downgrades, and churn rate, GRR is a bit more straightforward—it simply measures how much of your recurring revenue you’re keeping from existing customers, without accounting for any expansions or upsells.
In other words, GRR looks at the base revenue from customers and doesn’t consider growth. If you want to know how much your existing customers are expanding, NRR is the metric you need.
High NRR is a clear sign that your customers see value in your product or service—and are willing to invest more over time. It shows that not only are you retaining customers, but you’re also growing their accounts through cross-selling, upselling, and expansions.
For SaaS companies that are scaling, a high NRR (often 120% or higher) is a strong indicator of future revenue growth. It shows that you’re not just filling the top of the funnel with new customers—you’re deepening your relationship with the ones you already have.
For CEOs and finance teams, NRR is a goldmine of insights. It helps them forecast future performance, identify where to allocate resources, and understand the long-term potential of the business. Simply put, NRR is a powerful tool for predicting sustainable growth.
Calculating NRR might seem complicated at first, but it’s actually pretty straightforward once you break it down step by step.
Here’s the net revenue retention formula:
Let’s explain each part:
Let’s say your business starts the month with $100,000 in recurring revenue (Starting MRR).
Now, plug these numbers into the formula:
NRR = ($100,000 + $20,000 - $5,000 - $10,000) ÷ $100,000
NRR = $105,000 ÷ $100,000 = 1.05 or 105%
What does that mean? You not only kept your existing customers, but you also grew their spending by 5%. A great result!
($100,000 + $30,000 - $5,000) ÷ $100,000 = 125%
In this case, your customers are spending 25% more with you than they were at the start of the month. That’s a fantastic sign of business growth!
($100,000 + $5,000 - $20,000) ÷ $100,000 = 85%
This means you lost more revenue from cancellations than you gained from upgrades, which is a red flag for your business.
While the formula is simple, a few common mistakes can lead to incorrect numbers:
Now that you know how to calculate NRR, let’s talk about how your NRR stacks up against others in your industry. Benchmarks give you a clear picture of whether you’re crushing it or have room for improvement.
Industry benchmarks are basically performance averages for specific metrics, like NRR, across different sectors. These benchmarks let you compare your business to others in your industry and help you see if your NRR is above or below the norm.
Why does this matter? Because benchmarks can tell you whether your NRR is strong or needs improvement, and they can help guide your growth strategy. If you’re way below the industry average, you might have retention issues that need to be addressed. If you’re above it, congrats! You’re likely doing something right with your customer retention and expansion efforts.
NRR isn’t one-size-fits-all—it varies by industry. Let’s break down what’s a good net revenue retention rate by looking at some typical benchmarks:
These net revenue retention benchmarks give you a rough idea of where your business might stand, depending on your industry. But keep in mind, hitting the average isn’t the goal—you want to aim higher.
So, what do you do with this data?
Simple: Use it as a roadmap to assess your own performance and set improvement goals.
Look at benchmarks not as a ceiling but as a baseline. They help you set realistic goals while giving you insight into what’s possible in your industry. Use this data to refine your customer retention strategy, prioritize expansion efforts, and continually push your NRR higher.
Improving NRR doesn’t happen by chance. It requires deliberate strategies focused on keeping customers happy and expanding their investment in your business. Here are some of the best practices to make sure your NRR is on an upward trajectory.
Not all customers are the same, so why treat them that way? Customer segmentation is key to identifying your high-value groups—the ones most likely to stick around and spend more. By dividing your customer base into meaningful segments, you can focus your retention and upsell efforts where they matter most.
How to do it: HubSpot can organize your customers by factors like industry, spending behavior, or product usage. This way, you can deliver more personalized marketing and customer service. Prioritize your efforts on customers who show the highest potential for expansion, and give them the attention they deserve.
Happy customers stay longer—and spend more. That’s a direct correlation. If you want to boost NRR, improving the customer experience should be at the top of your to-do list.
Practical tips:
Your existing customers are the most valuable asset you have when it comes to generating new revenue. Upselling (encouraging customers to upgrade) and cross-selling (offering complementary products) can significantly boost your NRR.
How to do it: Set up automated workflows in your CRM, like HubSpot, to recommend relevant upsells or cross-sells at just the right time. Use playbooks to guide your team on how to approach these opportunities. The goal is to offer more value, not just push more products—so be strategic about what you offer and when.
Churn is the enemy of a healthy NRR, so addressing it early is crucial. Identifying at-risk customers before they leave can save you revenue and relationships.
How to reduce churn:
Technology is your best friend when it comes to optimizing NRR. By leveraging the right tools and systems, you can ensure your revenue data is accurate, visible, and actionable—making it easier to boost retention and revenue growth.
FinOps, or financial operations, is all about managing your revenue with precision. Proper FinOps practices help you track and recognize revenue accurately, giving you real-time visibility into critical metrics like Monthly Recurring Revenue (MRR), Net New Revenue, Expansions, Contractions, and Churn.
Why it matters: Accurate revenue recognition is essential for measuring NRR correctly. Without it, you’re flying blind. By integrating tools like HubSpot with finance platforms such as QuickBooks or Xero, you can streamline your revenue reporting and keep your NRR calculations on point.
How to do it: Use data transformation tools like Coefficient to sync data between your CRM and finance systems, ensuring all your revenue metrics are updated in real-time. This eliminates manual entry errors and gives you a clear view of where your recurring revenue stands at any moment.
Visibility into your revenue data is key. You can’t optimize NRR if you don’t have a clear, accurate snapshot of what’s happening across your business. That’s where data integrity comes in—making sure your revenue data is not only up-to-date but also synced seamlessly between systems.
How to maintain visibility: Automate data syncs between your finance tools and CRM platforms. For example, integrating HubSpot with your finance system ensures that your revenue snapshots are always accurate and up to date. This gives you the insights needed to make informed decisions, whether it’s about retention efforts or where to focus upsell opportunities.
Why automation is a game-changer: Manual data entry can lead to errors and delays in reporting, which can distort your understanding of NRR. By automating the flow of revenue data between systems, you’re not only reducing human error but also gaining real-time insights that help you stay on top of your NRR goals.