What is NRR?
NRR (Net Revenue Retention), also called NDR (Net Dollar Retention), measures the percentage of recurring revenue that a company retains from existing customers over a period, including the effects of churn, downgrades, and expansion revenue.
NRR is one of the most important metrics for SaaS companies, as it shows whether the company can grow from its existing customer base alone - without adding new customers.
How to calculate NRR
Formula
NRR = (Starting MRR + Expansion - Churn - Downgrades) / Starting MRR × 100
Example
- Starting MRR (January): $100,000
- Expansion revenue: $15,000
- Churned revenue: $8,000
- Downgrades: $2,000
- NRR: ($100,000 + $15,000 - $8,000 - $2,000) / $100,000 = 105%
An NRR of 105% means the company is growing 5% from existing customers alone.
NRR benchmarks
- Above 120%: Excellent - strong expansion drives growth
- 100-120%: Good - expansion offsets churn
- 90-100%: Acceptable - slight negative net retention
- Below 90%: Concerning - high churn without sufficient expansion
Top SaaS companies like Snowflake and Twilio have NRR above 150%.
Why is NRR important?
For the company
- Growth indicator: Shows if you can grow without new customers
- Product fit: High NRR indicates product-market fit
- Investor metric: Often the most important metric for SaaS investors
- Unit economics: Affects CLV and CAC payback
For sales compensation
- CS/AM compensation: Foundation for expansion commission
- Quality measure: Indicates quality of new customers
- Team bonuses: Often used as a team target
NRR components
Positive factors
- Upsells: Customers upgrade to higher plans
- Cross-sells: Customers buy additional products
- Price increases: Annual price raises
- Seat expansion: More users added
Negative factors
- Churn: Customers cancel entirely
- Downgrades: Customers move to lower plans
- Seat contraction: Fewer users
How to improve NRR
Reduce churn
- Proactive customer success
- Better onboarding and adoption
- Early identification of at-risk customers
- Regular business reviews
Increase expansion
- Land-and-expand strategy
- Upsell opportunities built into product
- Dedicated expansion teams
- Usage-based pricing that grows with customer
NRR and sales compensation
NRR affects compensation design in several ways:
For Account Managers/CSM
- Commission on expansion revenue
- Retention bonuses (low churn)
- NRR as team target
For New Business salespeople
- Quality bonus based on customers' subsequent NRR
- Clawback for early churn
- Higher commission for "expandable" customers
NRR vs. GRR
- NRR (Net Revenue Retention): Includes expansion - can be above 100%
- GRR (Gross Revenue Retention): Only churn and downgrades - max 100%
Both are important: GRR shows pure retention, NRR shows overall customer value development.
Related terms
- Churn: Customer attrition
- Expansion Revenue: Additional sales to existing customers
- CLV: Customer Lifetime Value
- ARR/MRR: Recurring revenue
- GRR: Gross Revenue Retention
Track NRR with Prowi
Effective expansion compensation requires accurate tracking of customer development. With Prowi, you can automatically calculate commission on expansion revenue, set NRR-based team bonuses, and give your CS and AM teams real-time insight into their performance. Book a demo and see how Prowi supports your focus on net revenue retention.