How to Calculate Net Revenue Retention in SaaS
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from an existing cohort of customers over a specified timeframe. NRR reflects whether your existing subscriber base expands organically without new customer acquisition spending.
Top-performing SaaS companies generate NRR figures well above 100%, achieving net negative revenue churn that compounds total ARR growth.
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The Net Revenue Retention Formula
NRR is computed by taking starting cohort MRR, adding expansion revenue, subtracting downgrades and churn, and dividing by starting cohort MRR:
NRR % = [(Starting MRR + Expansion MRR - Contraction MRR - Churned MRR) / Starting MRR] x 100
Let us walk through an enterprise cohort over a 12-month period:
- Starting Cohort MRR: $100,000.00
- Expansion MRR (Upgrades & Add-ons): $15,000.00
- Contraction MRR (Downgrades): $3,000.00
- Churned MRR (Cancellations): $2,000.00
- Ending Cohort MRR: $100,000 + $15,000 - $3,000 - $2,000 = $110,000.00
- NRR Percentage: ($110,000 / $100,000) x 100 = 110.00%
NRR Benchmarks for SaaS Companies
- SMB SaaS Focus: Healthy benchmark is 90% to 100%. SMB churn requires constant net new acquisition.
- Mid-Market SaaS Focus: Healthy benchmark is 105% to 115%. Seat expansion balances account loss.
- Enterprise SaaS Focus: Benchmark target is 120% to 140%+. Multi-product adoption scales cohort revenue rapidly.
Test your cohort figures using our free NRR Calculator.
