This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
The metric investors ask about first
For any subscription business, keeping and growing existing customers is cheaper than finding new ones. Net revenue retention (NRR), also called net dollar retention, measures how much recurring revenue a group of customers brings in at the end of a period compared with the start, including upgrades but excluding new customers. Investors in software companies often look at it before growth itself.
The formulas
NRR = (starting revenue + expansion − contraction − churn) ÷ starting revenue
GRR = (starting revenue − contraction − churn) ÷ starting revenue
- Expansion: upgrades to higher plans, extra seats, add-ons and price increases.
- Contraction: downgrades, fewer seats and new discounts.
- Churn: revenue from customers who cancelled.
Use the same customers at the start and at the end. Revenue from customers acquired during the period is left out of both ratios.
Example
A company starts the year with $100,000 of annual recurring revenue from existing customers. During the year they add $15,000 of expansion, lose $3,000 to downgrades and $7,000 to cancellations:
- NRR = (100,000 + 15,000 − 3,000 − 7,000) ÷ 100,000 = 105%
- GRR = (100,000 − 3,000 − 7,000) ÷ 100,000 = 90%
With $20,000 from new customers, total recurring revenue reaches $125,000, a 25% growth rate. Because NRR is above 100%, the business would still grow 5% a year even if sales stopped finding new customers.
Benchmarks
| NRR | Reading |
|---|---|
| Above 120% | Excellent; typical of top enterprise software companies |
| 100 to 120% | Healthy |
| 90 to 100% | The base is shrinking slowly |
| Below 90% | Retention problem |
GRR shows the floor: above 90% is strong, and businesses selling to small companies often sit around 80 to 90%.
Monthly and annual figures
If you track MRR month by month, choose the monthly period. The calculator raises the monthly NRR to the 12th power to give an annual equivalent. This assumes the same rate every month and is only an approximation of a true 12-month cohort, which is the better measure once you have a year of data.
Improving it
Reduce churn with better onboarding and support, design pricing that grows with usage, and make upgrades easy. A high NRR built only on price increases may not last, so watch GRR alongside it.