What is Net Revenue Retention (NRR)?
Net revenue retention is what happened to the revenue you already had. Take a cohort of existing customers, add the expansion they bought, subtract what they downgraded or cancelled, and compare against what they were worth at the start. New customers are excluded by definition.
NRR above 100% means your existing customers are collectively spending more than they were, even after everyone who left. That is the property investors pay for, because it means revenue compounds without new acquisition.
NRR is the mirror image of net MRR churn: an NRR of 98% and a net MRR churn of 2% are the same statement. Teams that report negative net churn and teams that report NRR over 100% are describing the same thing in opposite directions.
The exclusion of new business is what makes NRR honest. A month of heavy new-logo growth cannot rescue an NRR figure, which is exactly why it survives as a quality-of-revenue measure when raw growth does not.
How to calculate NRR
NRR = (starting MRR + expansion + reactivation − contraction − churn) ÷ starting MRR x 100
- starting MRR
- MRR from existing customers at the start of the period
- expansion
- upgrades, seat additions and price increases on those same customers
- reactivation
- previously churned customers who came back in the period
- contraction
- downgrades and seat reductions
- churn
- MRR lost to cancellations
The same statement, as churn
NRR = 100% − net MRR churn rate
NRR example
Given
- Starting MRR from existing customers: $48,000
- Expansion: $1,450, reactivation: $300
- Contraction: $820, churn: $1,900
- New business this month: $3,200 (excluded on purpose)
Just under 100%: this book shrinks slightly on its own and depends on new business to grow. Including the $3,200 of new business would have shown 104.6% and hidden that entirely.
Why NRR matters
- It is the clearest single read on whether customers get more valuable over time. Above 100% and revenue compounds on its own; below and every month starts with a hole to fill.
- It drives valuation more than raw growth at a given scale, because it says growth is durable rather than purchased.
- It separates a pricing and packaging problem from an acquisition problem. Flat NRR with strong new business means you sell well and expand badly.
Common NRR mistakes
Letting new business leak into the numerator
This is the mistake that turns NRR into a growth rate. If new logos are in there, the metric no longer says anything about retention.
Quoting a monthly figure as if it were annual
NRR is conventionally annual. A monthly NRR of 98% is not comparable to a benchmark of 120%, because the annualized equivalent is far below it.
Comparing across segments without saying so
Enterprise books routinely run NRR well above 100% while self-serve books sit below it. A blended figure for a company with both describes neither.
How Kometrics computes NRR
Kometrics does not currently publish a metric labelled NRR. It publishes net MRR churn rate, which is the same measurement with the sign flipped: subtract it from 100% and you have NRR for that period. The report divides churn plus contraction minus expansion minus reactivation by MRR at the period start, and excludes new business, exactly as NRR requires.
The MRR cohort report is the other half of the picture. Each cell is a cohort's current MRR against the MRR it committed at signup, which is net revenue retention traced by signup month, and cells above 100% are cohorts whose expansion has outrun their losses.
Related terms
Gross revenue retention is the share of existing revenue you held onto, counting only the losses. Downgrades and cancellations count against you; expansion earns no credit, so GRR can never exceed 100%.
Churn rateChurn rate is the share of your customers, or of your revenue, that you lost during a period. Which of the two you mean changes the number substantially, so the qualifier matters as much as the figure.
Expansion MRRExpansion MRR is the additional recurring revenue you earn from customers you already have. Upgrades to a higher plan, extra seats, add-on modules and price increases all count; a new customer never does.
Cohort retentionCohort retention groups customers by the month they started paying and follows each group forward, so you can see how long customers stay and how their spend develops, without newer customers masking older ones.
Contraction MRRContraction MRR is recurring revenue lost from customers who stayed: downgrades, removed seats, dropped add-ons and expired discounts running the other way. The customer is still yours, they are simply worth less.
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