Net Revenue Retention Rate (NRR) is the percentage of revenue you have made and retained from existing customers at the start of a financial period once you have accounted for expansion revenue and churn
Essentially, it is a track record of predictable revenue. Its main purpose is to determine the recurring revenue from existing customers during a specific time period, helping you to see how likely it is to continue and to measure how changes you make to your product or service affect it.
Predictably, the higher the NRR, the more likely the company will continue growing. You want to be at over 100% as a SaaS company, as this means you are growing rapidly, being efficient with your spending, and allocating resources and capital correctly. Anything below means you are contracting and losing customers.
The formula for NRR is: NRR = (Starting MRR + Expansion MRR - Churned MRR) / Starting MRR
Expansion MRR covers upselling, cross-selling, upgrades, and tier-based price increases. Churned MRR covers churn, cancellation, non-renewals, and other contractions.
Having a high NRR means you understand your customers, have a positive relationship with them, and have an idea of what future customers and expansion can look like.