MRR Lab

Net Revenue Retention Calculator

Calculate your Net Revenue Retention (NRR) to measure how well you retain and grow revenue from existing customers.

Current MRR: $100k

New MRR per month: $10k

Revenue growth from existing customers

Revenue reduction from downgrades

Revenue lost from cancellations

Number of months to forecast (1-60)

What is Net Revenue Retention (NRR)?

Net Revenue Retention (NRR), also known as Net Dollar Retention (NDR), measures how much recurring revenue you retain from your existing customers over time, including expansions and contractions.

In theory, a SaaS business with NRR > 100% would continue to growth without acquiring new customers. In practice, a SaaS business that does not acquire new customers will eventually run out of customers to expand (e.g. all customers have churned).

NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR × 100%

NRR can also be calculated as NRR = MRR expansion rate - MRR contraction rate - MRR churn rate

For example:

  • Starting MRR: $100,000
  • Expansion MRR: $20,000 (upgrades, add-ons)
  • Contraction MRR: $5,000 (downgrades)
  • Churn MRR: $10,000 (cancellations)
  • NRR = ($100,000 + $20,000 - $5,000 - $10,000) / $100,000 × 100% = 105%

In this case MRR increased by 5% before considering MRR from new customers.

Understanding NRR Components

NRR is influenced by four main factors:

  1. Starting MRR: Your baseline recurring revenue

    • Monthly recurring revenue at the start of the period
    • Example: $100,000 MRR from existing customers

  2. Expansion Revenue: Additional revenue from existing customers

    • Plan upgrades
    • Additional seats/licenses
    • Cross-sells and upsells
    • Example: Customer increases from $1,000 to $1,500 MRR

  3. Contraction Revenue: Reduced revenue from downgrades

    • Plan downgrades
    • Reduced seats/licenses
    • Example: Customer decreases from $1,500 to $1,000 MRR

  4. Churn Revenue: Lost revenue from cancellations

    • Complete customer cancellations
    • Example: Customer cancels $1,000 MRR subscription

How to use this calculator

  1. Enter your Starting MRR

    • This is your total Monthly Recurring Revenue from existing customers
    • Example: $100,000 MRR

  2. Enter your Monthly New MRR

    • This is the MRR from new customers acquired each month
    • Example: $10,000 new MRR per month
    • Note: This is used for forecasting but not included in NRR calculation

  3. Enter your Expansion Rate

    • The percentage of existing MRR that expands each month
    • Example: 5% means $5,000 expansion on $100,000 MRR
    • Include upgrades, additional seats, and add-on purchases

  4. Enter your Contraction Rate

    • The percentage of existing MRR that contracts each month
    • Example: 2% means $2,000 contraction on $100,000 MRR
    • Include downgrades and reduced seats/licenses

  5. Enter your Churn Rate

    • The percentage of existing MRR lost to cancellations each month
    • Example: 3% means $3,000 churn on $100,000 MRR
    • Only include complete cancellations

The calculator will automatically:

  • Calculate your monthly NRR rate
  • Show NRR trends over time
  • Display MRR from existing customers
  • Project future NRR based on current rates
  • Visualize the impact of expansion, contraction, and churn

Common NRR Calculation Mistakes to Avoid

  1. Including New Customer Revenue

    • NRR only considers existing customers
    • New customer revenue should be excluded

  2. Mixing Time Periods

    • Use consistent time periods (monthly or annual)
    • Convert annual rates to monthly if needed

  3. Double Counting Expansions

    • Count each expansion only once
    • Track the net change in customer revenue

  4. Ignoring Seasonality

    • Consider seasonal patterns in expansion/contraction
    • Use longer periods to smooth seasonality

Related Metrics

  • Gross Revenue Retention (GRR): Like NRR but excludes expansions
  • Monthly Recurring Revenue (MRR): Base metric for NRR calculation
  • Customer Expansion Rate: Rate of revenue growth from existing customers
  • Revenue Churn Rate: Rate of revenue loss from customer base
  • Quick Ratio: Measures efficiency of revenue growth

Best Practices for Improving NRR

  1. Product-Led Growth

  2. Customer Success Focus

  3. Pricing Strategy

    • Implement usage-based pricing
    • Create clear upgrade paths
    • Design pricing tiers that grow with customers
    • Align pricing with customer value metrics

  4. Churn Prevention

    • Identify at-risk customers early
    • Build strong onboarding process
    • Monitor engagement metrics
    • Create customer feedback loops