Net Revenue Retention: Are Existing Customers Growing?

Simple definition

NRR (Net Revenue Retention) tells you what happens to a dollar of revenue from existing customers over time. It captures the full picture — upgrades, downgrades, and cancellations — in a single percentage. If customers find increasing value the longer they stay, NRR reflects that. If they quietly downgrade, NRR catches that too.

How to calculate it

NRR = (Starting MRR + Expansion − Contraction − Churn) ÷ Starting MRR × 100

Say you started the month with $5,000 MRR from existing customers. During the month, $400 came from upgrades (expansion), $150 was lost to downgrades (contraction), and $300 was lost to cancellations (churn):

NRR = ($5,000 + $400 − $150 − $300) ÷ $5,000 × 100 = 99%

That means your existing customer base shrank by 1% in dollar terms — close to healthy but not yet self-sustaining without new customers.

Example

You run a scheduling tool at $19/mo and $49/mo tiers. You start January with 80 customers generating $2,400 MRR. During the month, 5 users upgrade from $19 to $49 (+$150 expansion), 2 users downgrade from $49 to $19 (−$60 contraction), and 3 users cancel their $19 plans (−$57 churn). Your NRR = ($2,400 + $150 − $60 − $57) ÷ $2,400 × 100 = 101.4%. Your existing base is growing on its own. Now every new customer you acquire adds to an already expanding revenue base.

Related reading

• MRR
• Churn Rate