Key takeaways
- NRR follows one group of customers; new customers never enter the calculation.
- Expansion pushes it up; downgrades and cancellations pull it down.
- Gross revenue retention leaves expansion out, so it shows the leakage NRR can hide.
- Net dollar retention is the same measure under another name.
What is the net revenue retention formula
The net revenue retention formula is: starting recurring revenue, plus expansion, minus contraction, minus churn, all divided by starting recurring revenue. Every figure comes from the same group of customers who were paying at the start of the period.
With illustrative figures: a group pays 100,000 a month in January. Over the year it adds 12,000 through upgrades, loses 3,000 to downgrades and 5,000 to cancellations. The next January it pays 104,000, so NRR is 104,000 divided by 100,000, or 1.04, which is usually shown as a percentage.
What are the parts of NRR
NRR has four parts, and each one points to a different team's work. Looking at them one by one is more useful than the single result.
- Starting revenue: what the group paid at the start of the period.
- Expansion: upgrades, added seats and cross-sold products.
- Contraction: downgrades and removed seats from customers who stay.
- Churn: revenue from customers who cancelled entirely.
NRR vs GRR: what is the difference
Gross revenue retention, or GRR, uses the same group but leaves expansion out, so it can never exceed the starting amount. It answers how much revenue you kept, while NRR answers how much you kept and grew.
Read them together. A strong NRR with a weak GRR means a few growing customers are covering for many who leave, a pattern that breaks once those few stop growing.
Is net dollar retention the same as NRR
Yes, net dollar retention, or NDR, is the same calculation under a name taken from companies that bill in dollars. Some teams prefer NRR because it does not name a currency.
What does NRR say about a customer base
NRR says whether customers find more value in the product over time. A rising figure suggests customers are adopting more; a falling one suggests they are finding less, or finding it elsewhere.
Split it before acting on it. NRR by customer segment, plan or the quarter customers joined often shows that one group drives the whole result, which a single company-wide figure hides.
Where Pebbles Ai fits
Common questions
What is a good net revenue retention?
There is no single good figure, because it depends on the customer segment, the pricing model and how long customers have been with you. Compare your own figure over time and by segment before comparing with anyone else's.
Can net revenue retention be above one?
Yes. When expansion from existing customers outweighs what they downgrade or cancel, the group pays more at the end than at the start.
Should NRR be measured monthly or yearly?
Most teams report it over twelve months to smooth out seasonal swings, and check a monthly view for early warning. Use the same period every time so the figures compare.
About this page. Written by the Pebbles Ai team for people who run sales, marketing and growth. Last updated .
