What is Net Revenue Retention (NRR)?
NRR is the revenue produced at the end of a period by the customers you had at the start, divided by their starting revenue. The formula is NRR = (Starting MRR + Expansion MRR − Contraction MRR − Churned MRR) / Starting MRR × 100. The critical detail: newly acquired customers are excluded. That makes NRR the one metric that tells you whether the business would still grow if you switched the sales engine off.
Worked example
A SaaS starts the month with $40,000 MRR. During the month it books $6,000 of expansion (upsell, extra seats), $1,500 of contraction (downgrades) and $2,500 of churn. NRR = (40,000 + 6,000 − 1,500 − 2,500) / 40,000 × 100 = 105%. Revenue grew 5% without a single new customer. Gross retention (GRR) in the same period = (40,000 − 1,500 − 2,500) / 40,000 × 100 = 90%; the 15-point gap is pure expansion.
Healthy NRR benchmarks
Common reference ranges: 90-100% for SMB-focused SaaS, 100-110% for mid-market, and 120%+ for enterprise or usage-based pricing models. Below 100% the existing base is shrinking and growth depends entirely on new sales, which keeps pushing CAC pressure up. Above 120% is the profile investors reward with the highest multiples.
Improving NRR usually runs through product and customer success rather than sales: faster onboarding, usage-based pricing tiers, frictionless seat and module expansion, and health scores that surface churn risk early. Tracking NRR by cohort and segment reveals which customer profile actually expands.