Net Retention Rate (NRR) is the MRR growth rate excluding revenue from new customers. It measures the revenue retained from existing customers over a specific period, including upsells, cross-sells, downgrades, and churn.
This metric is commonly used to gauge how well you retain and grow your existing customer base. >100% is a great benchmark because it implies revenue is growing without considering new customers – this is called Net Negative Churn.
(End of Period MRR - New Customer MRR) / Start of Period MRR
To calculate NRR, subtract the Monthly Recurring Revenue (MRR) from new customers from the end-of-period MRR, then divide by the start-of-period MRR.
NRR can be increased by decreasing MRR Lost from existing customers or increasing Expansion MRR. To decrease MRR Lost, regularly collect feedback to understand why customers churn or downgrade. Be proactive with education and communication around your product. Invest in providing excellent customer service. To increase Expansion MRR, focus on driving up-sells and cross-sells and experiment with tiered pricing models.
NRR is sometimes undervalued compared to new customer acquisition metrics, but it's important for sustainable growth. Another common misconception is that NRR is about preventing churn. NRR also covers revenue expansion from existing customers and not just churn prevention.