Net Revenue Retention Forecaster

The NRR formula this forecaster uses

NRR % = 100 − Annual gross revenue churn % + Annual expansion %
ARR in year n = Current ARR × (NRR ÷ 100)^n
Standard form: NRR = (Starting ARR + Expansion − Contraction − Churned ARR) ÷ Starting ARR

Annual gross revenue churn %

Share of starting ARR lost in a year to cancellations and downgrades (churn plus contraction).

Annual expansion %

Share of starting ARR gained in a year from upsells, cross-sells and seat growth among existing customers.

NRR

Net revenue retention: what this year's existing customers pay now as a share of what they paid a year ago. New customers are excluded.

n

Years forward: 1, 2 or 3. The rate is held flat and compounded.

Gross revenue retention (GRR) is the same calculation without expansion: 100 − gross churn. GRR cannot exceed 100%, so it shows the loss side alone. Measure both inputs against the same starting ARR and the same customer group, the customers you had at the start of the twelve months. For the movement-by-movement view, use the MRR bridge planner.

Worked example: $4M ARR, 10% churn, 18% expansion

A B2B SaaS company has $4.0M ARR. Over the last year it lost 10% of starting ARR to cancellations and downgrades and gained 18% from upsells and extra seats.

1. NRR = 100 − 10 + 18 = 108%.
2. Year 1 = $4,000,000 × 1.08 = $4,320,000.
3. Year 2 = $4,000,000 × 1.08² = $4,665,600.
4. Year 3 = $4,000,000 × 1.08³ = $5,038,848, about $5.04M without one new customer.
5. Compare 98% NRR (10% churn, 8% expansion): year 3 = $4,000,000 × 0.98³ = $3,764,768.
6. Gap after three years = $5.04M − $3.76M = about $1.27M of ARR from a 10-point difference in NRR.
7. In rupees: ₹20 crore ARR at 103% NRR becomes about ₹21.85 crore in three years; at 98% it falls to about ₹18.82 crore.

What NRR should you aim for?

Benchmark against companies with a similar price point. SaaS Capital says ACV is the best basis for comparing retention, because companies that sell at a similar price are organised, sell and support customers in similar ways.

• Below 100%: the base shrinks every year. For products under $12k ACV, the median is 98%, so this is common for SMB tools, but it means growth has to come entirely from new logos.
• 100% to 110%: around or above median for most ACV bands. Companies in this band grew at a 21% median.
• 110% and above: top quartile for mid-market ACVs (75th percentile 111% at $25k to $50k). Growth medians rise to 30% and above. Bessemer Venture Partners rates 100% as good, 110% as better and 120% or more as best for a typical Series B or C enterprise software company, noting that the bars shift by stage and by SMB, mid-market or enterprise audience.

NRR is also one of the three inputs in SaaS Capital's private valuation model, alongside growth and public multiples. The ARR and SaaS valuation calculator shows how much NRR moves the multiple, and the NRR benchmark guide covers the figures in more depth.

Net revenue retention in India vs the US

Common NRR mistakes

• Including revenue from customers acquired during the year, which turns NRR into a growth rate.
• Leaving contraction out of churn. Downgrades reduce NRR just as cancellations do.
• Measuring expansion and churn against different bases, such as churn against starting ARR and expansion against ending ARR.
• Reporting NRR without GRR, which hides how much churn the expansion is covering.
• Counting price increases as expansion without saying so. They count, but they may not repeat.
• Assuming a three-year NRR projection will hold. Expansion can slow as accounts mature.