What is Net Revenue Retention (NRR)?
Short Answer
NRR measures the revenue retained from a cohort of customers plus expansion revenue (upsells, cross-sells) minus churn, expressing it as a percentage of starting revenue.
Full Explanation
NRR = (Starting Revenue − Churned Revenue + Expansion Revenue) / Starting Revenue. For example, if a SaaS company starts with £100K revenue from a cohort, churns £10K, and adds £15K from upsells, NRR = (£100K − £10K + £15K) / £100K = 105%. An NRR above 100% means the company is generating more revenue from existing customers than it started with (expansion outpaces churn). This is the gold standard for SaaS — it indicates the business is expanding within existing customers faster than they are leaving. NRR above 110% is exceptional and typical of best-in-class B2B SaaS companies. NRR above 130% indicates a land-and-expand model where customers expand significantly post-sale. For investors, NRR is perhaps the most important unit-economics metric because it determines long-term durability: a company with 90% NRR will eventually grind to a halt despite excellent new customer acquisition, while a company with 110% NRR can slow sales growth and still expand. Many SaaS valuations are driven more by NRR than by absolute growth rate.
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Further Reading
What is Customer Lifetime Value (LTV)?
LTV is the total profit a company expects to generate from a customer relationship over its lifetime — calculated as (ARPU × Contribution Margin) / Monthly Churn.
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