= 1.015. Create customer cohorts based on value. While GRR gives you the amount you could have made through your existing customers if they didnt churn. NRR gives you a more realistic picture of how much growth can you expect from your existing customers. You must be able to confidently speak about NRR, how it looks by different cohorts and the strategies you use to increase it. Its a fairly industry-specific metric, so its usually something your accountant and the financial team will have to calculate on their own. Everything you need to master financial and valuation modeling: 3-Statement Modeling, DCF, Comps, M&A and LBO. Proactively identify at-risk customers and prevent churn using automation, early warning insights, and more! To calculate your net revenue retention, you need to consider four things that affect your monthly recurring . As the custodians of value attainment, the customer success team has the most insight into customer behavior. When you have a SaaS or subscription-based business, recurring customers are a little like anchor tenants in a shopping mall. This way, you will also ascertain which group is churning too frequently. Typically, it is calculated on an annual or monthly basis. NRR offers the most clear-cut valuation of your customers success. Kainos may not be a household name but since it floated on the London Stock Exchange in 2015, it has been growing revenues organically by 20-30% a year. While the average SaaS business does hover around 100%, pushing for a higher rate is a good way to improve your MRR. Map the data from your accounting package to the appropriate cells in your sheet, and youll always have up-to-the-minute data about retention revenue at your fingertips when you need it. The only difference between NRR and GRR is that NRR includes Expansion MRR while GRR does not. Here is a write-up that discusses the importance of Net Revenue Retention from the customer success perspective. One need only look at the rise of NRR and its impact on valuation to see that undervaluing customer success comes at a heavy price. Heres what you need to know. Expansion Revenue Upselling, Cross-Selling, Upgrades, Tier-Based Price Increases For example, if you have the same 20 customers paying $30/month in March, but in April you have 15 customers with 10 paying $30/month and 5 now paying $75/month, then your customer retention has decreased to 18, while your revenue retention has increased to $30 10 + 5 $75 = $675. "NDR measures the average percentage change in revenue over the first 12 months of an existing customer." RICH PRODUCT & CUSTOMER ANALYTICS Scale retention efforts with usage analytics and health scores. As a general rule of thumb, a financially sound SaaS company would have an NRR in excess of 100%. After applying the formula, we arrive at an ending MRR of $1.4 million for both companies. The first is the back-for-more component captured by a battle-tested statistic called net revenue retention (NRR), which is used in several industries, most notably software-as-a-service (SaaS . You can make new strategies and develop new products based on the current NRR to improve it. What is net revenue retention (NRR)? So, when NRR is more than 100 percent, the company is able to generate more revenue and recover the lost revenue from the churned customers. When paired with automation, you can trigger expansion outreach based on positive score changes. Gross retention vs Net retention benchmarks. It measures the overall impact on the revenue generation from your existing customers. So, NRR = (50,000 + 5000 2000 -1000) / 50,000 = 104%. In order to grow a SaaS or subscription-based company, ideally, you want to retain customers that youve already signed up at the same or higher rate as before and, at the same time, sign up new customers. Niyathi Rao Net Revenue Retention is a metric that indicates the stickiness of a SaaS product to its customers. Meaning, we can keep customers on our product. Snowflake S-1: Net Revenue Retention rate. How to Calculate Net Dollar Retention (NDR) Here is the math behind it. Without a proper health score, customer expansion can be fraught with risk. Define and track onboarding by phase, user progress, account, and portfolios. Identify, monitor, and execute timely account expansions with real-time reports and indicators. Net revenue retention (NRR; also referred to as net dollar retention) refers to the percentage of recurring revenue generated and retained by a business from its existing customers over a set period of time. Optimize product usage by monitoring in-depth user data and receiving actionable insights. You need to focus on two key points to improve your NRR: increase expansion revenue through upsells, cross-sells, and add-ons; reduce churn by minimizing downgrades and cancellations; If you look at how the NRR rate is calculated, you will see expansion MRR is the only metric that can provide a positive impact if increased. Net Revenue Retention (NRR) = (Starting MRR + Expansion MRR Churned MRR) / Starting MRR Expansion revenue and churned (or contraction) revenue are the two primary factors that impact a company's recurring revenue. It also acts as a measure of the customer success team's retention / upsell / cross-sell efforts. NRR At Kainos. The greater the NRR, the quicker companies can scale. Unlike NRR, GRR only shows your ability to retain customers. Q 4: What are the diverse ways to enhance your net retention rate by reducing customer churn? Top-performing SaaS companies can far exceed an NRR of 100% (i.e. NRR is simply total revenue minus any revenue churn, plus any revenue expansion from upgrades, cross-sells or upsells. Employee retention is equally important to your success. By providing long-term contracts at a discounted price, you give your customers adequate time to stick around for a longer time and see how it can benefit them. While this example is meant to be straightforward to see why customer retention rate can replace GRR, if your customers are paying different amounts, then there can be a variance between the numbers. Based on those metrics you can take corrective measures to keep your growth graph rising. Employee success drives customer success. document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); What is Expansion Revenue? A customer upgrading to a higher subscription plan. GRR tells you how satisfied customers are with your product as well as your customer service. This percentage is calculated for a specific time period, typically a month or a year. Expansion), NRR <100% Less Recurring Revenue from Churn and Downgrades (i.e. But, by adopting customer centricity, you can minimize this churn rate and enhance your net revenue retention. Q 2: Is there a major difference between Net Revenue Retention (NRR) and Gross Revenue Retention (GRR)? Source: Snowflake S1, page 11. Guide to Understanding Net Revenue Retention (NRR). Expertise from Forbes Councils members, operated under license. This is usually done by continuing to build new services and upselling to your clients by getting them to add each new tool to their service package. As such, it is becoming the north-star metric of customer success functions and, increasingly, organizations as a whole. 4. Net revenue retention is a SaaS metric that measures the recurring revenue generated from existing customers over a set period. With that being said, repeat customers i.e. Well now move to a modeling exercise, which you can access by filling out the form below. NRR = ((MRR at Start of Month + Expansion MRR) (Churn MRR + Contraction MRR)) (MRR Start of Month) 100%. When it comes to business expansion through existing customers, retaining the recurring revenue, which means preventing revenue churn is of course the foremost important goal. These figures or ratios mean that you have not seen a drop in customer retention. Net revenue retention (NRR), also known as net dollar retention (NDR), is a crucial key performance indicator (KPI) for SaaS and subscription-based companies. Aiming above 110%, and ideally even 120%, would be very appealing for an investor considering an early stage company, as it shows that . Net revenue is defined as a company's sales (revenue) minus discounts and returns. You can even see your customer segmentation, deeper insights about who your customers are, forecast into the future, and use automated tools to recover failed payments. Customers have not committed to your business anymore. Lets look at the math behind net revenue retention, gross retention revenue, and customer retention. Connect Baremetrics to your revenue sources, and start seeing all of your revenue in a crystal-clear dashboard. Net retention, which some call net revenue retention (NRR), is an important metric for organizations that have recurring revenue billed monthly or yearly, like SaaS organizations. This is because it can be easier to get customers that already love and value your service to spend more than to get new clients to sign up. But thats not the end of the story.48. In fact, it was probably a throwaway question, one of many in the long list of standard diligence questions. Therefore, NRR takes the MRR/ARR metrics a step further by describing a SaaS companys recurring revenue fluctuations that are attributable to factors like expansion revenue (e.g. Bring efficiency, add scale, and connect user behavior to personalized actions. Applying the Gross Retention formula, we get ($200,000 - ($500 x 2) - $2,000) / $200,000 = $197,000 . Higher retention signifies a more stable customer base and greater growth potential, and thats what investors care about. However, it's really two stories in one metric. Net Revenue Retention (NRR) is the percentage of revenue retained from existing customers at the start of a period after accounting for expansion revenue and churn. How to calculate Gross Revenue Retention Rate. For example, if a customer signs up for your service in March and stays in April, then the amount they spend in April is part of your retained revenue. While these metrics are still relevant today, the shift toward retention and expansion . Tracking NRR over time will give you a better understanding of the stability of your income stream. According to Software Equity Groups M&A figures, the valuation metrics of a SaaS company with high retention rates can be twice as much as a company with average rates. To calculate your MRR, you need to know how many customers you have and how much they spend every month on recurring billing or subscription-based contracts. Every investor looks at multiple numbers and makes a decision. This will help you to target them precisely and perfectly. A good measure of net retention is around 90+%. Because of how the financial world works, it is impossible to look at one number and take it as gospel for investing. A positive NRR is indicated by a net revenue retention that is greater than 100%. Low GRR shows your business is not viable over the long-term. You need to find ways to expand your business with the existing customer. However, stability in business does not equal growth, and the benchmark for growth using your net retention rate is any figure that is over 1 or 100%. GRR is especially helpful to measure the long-term growth of your business. It measures how good your company is at renewing or sustaining your existing customer base, as well as how good it is at generating additional revenue from those same customers. If the NRR is greater than 100%, the company is likely to be expanding rapidly, while remaining efficient with its spending and capital allocation relative to competitors with a lower NRR. 106%. NDR, also referred to as net revenue retention (NRR), accounts for upgrades, downgrades, and churn rate to indicate business growth. This means that NRR, by definition, is a little more accurate measure of where your business is and how it is doing. This will give you a percentage gross retention rate. Net revenue retention rate formula As mentioned in the introduction, NRR is an indication of your company's ability to retain and expand contracts. Use code at checkout for 15% off. Once you find a pattern, you can work on ways to address their concerns. NRR has an amazing compounding effect that, though in the first few pay periods might . Sign up for the Baremetrics free trial and start seeing more into your subscription revenues now. Gross revenue retention is beneficial in the context of net revenue retention. If you don't receive the email, be sure to check your spam folder before requesting the files again. Were happy to answer questions or arrange a live demo. Create value-based customer segmentation to inform your customer success and support strategy. Snowflake uses Net Revenue Retention rate. Net Revenue Retention is sometimes known as Net Dollar Retention (NDR). Hence, an NDR > 100% - the higher, the better - should be the aim. 100 customers (last year) $1,000 = $100,000. You can demonstrate an amazing product, have an expert executive team and show a top-tier growth trajectory, but without reasonable NRR, you will summarily get disqualified from funding consideration. Net Revenue Retention (NRR) Rate, also known as Net Dollar Retention (NDR), is the percentage of recurring revenue retained from existing customers in a defined time period, including expansion revenue, downgrades, and cancels. The reason is obviously the compounding effect over years. It's a broad metric that gives you an idea of what your revenue streams will look like over time if there are no new customers. This shows that the company is still growing after the losses incurred through churn and downgrades. Let's say Customer A pays us . Net Dollar Retention vs. Net Revenue Retention According to venture capitalist Seth Levine , Net Dollar Retention and Net Revenue Retention (NRR) are different. But, how do you calculate it? Net revenue retention rate = monthly recurring revenue (MRR) at the start of the month + expansions - churn - contractions / monthly MRR at the start of the month We'll explain this formula in more detail in a moment. A track record of predictable revenue makes raising capital from venture capital (VC) or growth equity firms much easier, as the long-term revenue sources reduce the risk of future cash flows, as well as signals the potential for product-market fit. But the continued reliance on new customer acquisitions to uphold MRR is not a sustainable business model, so assuming from the MRR alone that the company is in good shape could be a mistake. If your net retention in SaaS goes up consistently, youve probably got a great customer acquisition and retention plan. The current MRR from that same group of customers For example, if your high-ticket customers are more likely to churn, then your customer retention rate will be better than your GRR. Every SaaS business must aspire to achieve this goal. High GRR indicates a sustainable revenue stream and . While I mention a customer here, note that revenue retention and customer retention are not the same thing. When you regularly compute the NRR of a company, it helps you take requisite action against contingencies instead of only doing damage control. Since GRR is capped at 100% or your NRR, whichever is lower, a GRR of 90% is pretty good. Net Revenue Retention is the percentage of recurring revenue retained from existing customers over a given period (usually monthly or annually). In this article, I will explain NRR and GRR, present their formulas, provide examples of NRR and GRR calculations, and the implications of an NRR focus versus GRR focus. When it is above 100%, it means the business is healthy and is able to grow even without acquiring new customers. Here expansion means upgrades done by the customers. The gross retention rate and customer retention rate tells you how well you are keeping clients signed up for your service from month to month. A primary way to check why your customers are churning out is by using a churn survey. Gross Retention = (total revenue - revenue churn)/total revenue) x 100. Median net revenue retention was 106.5% at the time of IPO, declining slightly to 104% as companies mature. An NRR that is over 100% means that your revenue increase from upsells is greater than your revenue decrease from churn. Baremetrics provides an easy-to-read dashboard that gives you all the key metrics for your business, including MRR, ARR, LTV, total customers, and more directly in your Baremetrics dashboard. NRR is typically expressed as a percentage for purposes of comparability, so the resulting figure must then be multiplied by 100. This can include anything from upsells to cross-sells. Announces $1M+ Extended Angel Round Funding. This can help your sales and marketing team to examine what is driving customers to downgrade or choose another solution, so you can make the changes you need to keep your service on a positive growth path. cancellations, downgrades). This relationship appears throughout the dataset. Apart from upsell and cross-sells, you must also revise your SaaS pricing on a regular basis. Net revenue is sometimes called the 'real top line' because it reflects total sales with only direct sales-related expenses deducted. I often like to say that each metric you track is designed to answer a single question about your company (If you dont believe me, look here and look here too, as I really do say it a lot). To encourage the growth of post-sale revenue sources, add a variable component to your customer success compensation plan. Gross revenue retention (GRR) includes the recurring revenue from your existing customers including downgrades and cancellations. If either of these is not true, then you have made a mistake and need to recalculate your GRR and/or NRR. Shift renewal and expansion revenue responsibility to the customer success team. As you can probably imagine, calculations like the net revenue retention formula dont come standard in accounting software like QuickBooks. We would suggest you personalize your email while sending it to each customer. Lets take the same example again. Your net revenue retention, also sometimes called net dollar retention (NDR), is a SaaS metric that measures the revenue you retain from your existing customer base over a given period of time. Get instant access to video lessons taught by experienced investment bankers. Net Revenue Retention is the percentage of Recurring Revenue retained including upgrades, downgrades and churns from existing customers . Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts. MRR and ARR are both measures of recurring revenue from existing customers, however, the effects of future revenue churn are neglected. In the case of Company A, the churned MRR is masked by the new MRR, i.e. A customer buying a new product from your company. Get deep insights into MRR, churn, LTV and more to grow your business. <75%). upselling, cross-selling) and churned revenue (e.g. The net revenue retention rate tells you how much your revenue from current customers is growing or shrinking from month to month. Eliminate manual data entry and create customized dashboards with live data. What Is Net Revenue Retention (NRR)? Yet there are few pitfalls that businesses have to avoid in their growth journey. Even if you arent actively seeking outside capital, as NRR continues to take SaaS by storm, your investors and board will expect you to know it well and with nuance. When it comes to choosing NRR or GRR, it is best to use both for the different information they reveal about your business. Accelerate Onboarding & Product Adoption. Both gross and net revenue retention can tell you if your business is moving in the right direction, but NRR will give you a more accurate figure. Once you know what your MRR is, the formula for net revenue retention is: That sounds very complicated, but what you are really doing is calculating whether your net revenue retention per customer has stayed the same, increased, or decreased. It reflects how successful your company is at generating additional revenue from your existing customers, considering the income from upgrades, cross-sales, downgrades, and cancellations. Gross retention tells you how much revenue you're maintaining when activity that increases your average customer value isn't factored in. It is one of the widely used customer success KPIs to measure the performance of a SaaS business. We arent just any Customer Success platform. Baremetrics brings you metrics, dunning, engagement tools, and customer insights. To examine a different scenario, let's say that you up-sell your remaining 95 customers by $100 on average. The only difference between GRR and NRR is that GRR doesnt include business expansion through upgrades and cross-sells. SaaS businesses that want to grow steadily want to retain customers either at the same average subscription fee per month or period or upsell them to a more expensive package. How Does One Calculate and Track the NRR Walk? A 3: Net Revenue Retention (NRR) is a crucial metric that helps gauge the financial performance of a company. NRR is equal to the starting MRR plus expansion MRR minus churned MRR which is then divided by the starting MRR. As customers continue to expect more value from their products and services, companies need to invest more in the resources and tools to meet their demands. However, just keeping your customers does not mean your net revenue retention rate is great. The company's monthly recurring revenue (MRR) one year ago b. Higher Annual Contract Value (ACV) products . that the company is on the right track. A 1: When the NRR is more than 100 percent, the CSM has more upsell and cross-sell opportunities to generate more revenue instead of crying over the revenue lost over the churned customers. It also includes income decreases from stores or accounts that left the platform during the preceding one-year . This churn metric gives a comprehensive view of positive as well as negative changes with respect to customer retention. Net Revenue Retention calculates total revenue(including expansion) minus revenue churn (contract expirations, cancelations, or downgrades). In case you find that your customer onboarding process is too complex or overwhelming, ensure that you take effective steps to simplify the process. Conclusion. As evidenced by their net revenue retention rate of 168% as of January 31, 2021, product revenue increased $301.6 million for the fiscal year ended January 31, 2021 compared to the fiscal year ended January 31, 2020. Frequently asked questions about revenue retention. The lower switching cost has made it even easier for them to consider a new vendor. This technique takes into account stores that have been added to or removed from an account's subscription in the past twelve months. The ability to acquire new customers is just one piece of the puzzle, with the other being the long-term retention of those customers, as well as facilitating more expansion revenue. To calculate NRR, deduct your revenue. It is as follows: Your monthly recurring revenue of the month (a) Revenue through upsells and cross-sells (b) Revenue lost due to downgrades (c) Churned Revenue (d) The formula becomes: NRR = (a + b - c - d) / a If you have a company that has an MRR of $10,000. Net dollar retention (NDR) is a SaaS metric that measures how much your monthly or annual recurring revenue has grown or shrunk. Improving NRR stems from understanding not just future customers but maintaining close relationships with existing customers. Expansion MRR is the additional MRR from existing customers (also known as upgrade MRR). If this KPI has a value over or under 100%, it shows the health of a business through its existing customers accordingly. As mentioned in the introduction, NRR is an indication of your companys ability to retain and expand contracts. The 3 things venture capitalists look for in NRR and GRR. How can you increase net revenue retention? Gross revenue retention does not account for expansion revenue, while net revenue retention does. This means that for a $1B revenue SaaS company, a mere 1% increase in NRR could translate into more than $700M in enterprise value! Enterprise Software in SaaS: How They Are Categorized / Sized in the Americas, EMEA and APAC? Baremetrics is a business metrics tool that provides 26 metrics about your business, such as MRR, ARR, LTV, total customers, and more. It is calculated through the following equation: NDR = (Revenue at the start + upgrades - downgrades - churn) / Revenue at the start All numbers are in dollar amounts and the final figure is a percentage. One of the primary mistakes that B2B SaaS companies make is having monthly contracts for subscription packages. By factoring upgrades into their equation, a company can demonstrate its ability to generate revenue from existing customers who upgrade and increase services. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. We have the insights, imagination, and technology that others dont. Monitoring adoption trends and other behavioral intent data is key to identifying the right time to approach the right customers with the most relevant upsell or cross-sell offers. To calculate your MRR, you need to know how many customers you have and how much they spend every month on recurring billing or subscription-based contracts. The customer retention rate is sometimes calculated instead of GRR because it is much simpler and provides a similar snapshot of your growth trajectory. Features and SDKs you can integrate into your apps. Usually, that means a custom spreadsheet that you need to manually update at regular intervals. He loves tech products and book reading. A low measure of retention is around 75%. The differences between the companies appear once we calculate the net revenue retention (NRR). The Net Revenue Retention (NRR) is the percentage of recurring revenue that's retained from existing customers over a specific period of time. This is important because you not only want to see month-over-month growth, but you also want to retain a high percentage of customers that you first acquired in previous years. While NRR is an extremely important metric, it doesn't mean metrics such as GRR and logo retention should be over-looked. When customer downgrades to a lower-paying plan. Conceptually, the NRR formula can be thought of as dividing the current MRR from existing customers by the MRR from that same customer group in the prior period. This strategy can help your organization by providing a way to measure the return on . How Have SaaS Tools and the Cloud Let Enterprises Accelerate Scaling? It's unsurprising that potential investors in a SaaS business want to see an NRR at or above 100%. Company Bs future growth appears to be less reliant on acquiring new customers due to the greater expansion MRR, and lesser churned MRR. Once you know what your MRR is, the formula for net revenue retention is: [ (MRR of previous month + expansion revenue - subscription downgrades - churn) / MRR of the last month] x 100% = NRR When you are calculating your net revenue retention using the net revenue retention formula, ideally, you want to see a result of at least 1:1 or 100%. GRR calculates total revenue (excluding expansion) minus revenue churn (contract expirations, cancelations, or downgrades). Net revenue retention (also known as "Net Dollar Retention" or NDR) is the total (net) change in recurring revenue. Conversely, if your lower-tier customers are more likely to churn, then your GRR will be better than your customer retention rate. Segmentation is the foundation of proactive service that can increase product adoption and customer retention. With just 15% of customer interactions adding value, according to Gartners research, the opportunity for companies to corner the market with smart customer success that reaches out at the right time with the right ask is ripe for the taking. Also, with the help of subjective questions, you can learn about their pain areas and can make ways to eradicate them. As a CEO or investor, you never want to be surprised, especially by churn. I think of it as the health of our recurring revenue and customer base. Your calculation would be: 95 customers (this year) $1,000 = $95,000. NRR matters to SaaS executives and investors. Adaptive Pulse NRR is a KPI that helps you assess your company's growth and your customer's loyalty. Instead of $50,000 of MRR, consider there are 1,000 customers each paying $50/month. Q 3: What is the number one reason to track Net Revenue Retention Rate (NRR)? GRR also tends to decline as companies grow. We're sending the requested files to your email now. If youd like to find out more about LiveFlow and how it can help your SaaS company to track critical metrics like retention revenue, contact our team. Hence, in addition to New MRR and Reactivation MRR, GRR also omits Expansion MRR. An NDR >= 100% denotes a net positive MRR, whereas an NDR <100% denotes a net negative MRR. Net dollar retention measures the amount of revenue that you keep from your existing customer base and expand within your existing customer base. The LiveFlow platform lets you create a live link between your accounting software and Google Sheets, so you can create custom reports that update in real-time. For example, when designing your onboarding journey, you might choose a high-touch model with one-on-one coaching for your high-value customers and rely more on a tech-touch for other lower-valued segments of your customer base. GRR is always between 0% and 100%. Over the course of two . The median gross revenue retention rate for private companies is between 88% and 90%. Example A: A company has 100 customers, each paying $2,000 per month. Read on. To make sure youre not being misleading, monitor gross revenue retention (GRR) alongside NRR. long-term customer relationships are the source of recurring revenue, which is a function of high retention rates, constant engagement, and tangible improvements post-feedback. If your clients are satisfied, then they wont churn and your GRR will remain close to 100%. Dollar-based net revenue retention, or Net Dollar Retention as it is sometimes called, is a figure that represents how many of the previous years customers you have retained in your business and how much they have spent. For details please visit our, SmartKarrot Inc. This includes expansion revenue, such as upsells and cross-sells. He brings his love of all things business to his writing. Both Company A and Company B have begun the month with $1 million in MRR. The NRR formula takes into account: Expansion revenue (upgrades, cross-sells, or upsells) Downgraded revenue Churned revenue Still, the ending MRR is identical between the two competitors, and the NRR is much higher for Company B from the greater expansion MRR, and less churned MRR, implying more customer satisfaction and an increased likelihood of continued long-term recurring revenue. Net revenue retention defined. Churn is a reality in the B2B SaaS economy. For your SaaS business to keep growing, you should aim for an NRR above 100%. They monitor the dollar-based net revenue retention rate to measure this growth from exiting customers. The partners firm had already issued me the term sheet a few weeks prior. Customer expansion is a sustainable way to increase your NRR. Net Revenue Retention is easy to calculate. Q 1: Is there a definite meaning connected with the phrase NRR is more than 100%? Reactivation MRRis the additional MRR from churned customers who have reactivated their account. An Industry Overview, NRR Rate Revenue Churn and Expansion MRR, Net Revenue Retention (NRR) Calculator Excel Template, 100+ Excel Financial Modeling Shortcuts You Need to Know, The Ultimate Guide to Financial Modeling Best Practices and Conventions, Essential Reading for your Investment Banking Interview, The Impact of Tax Reform on Financial Modeling, Fixed Income Markets Certification (FIMC), The Investment Banking Interview Guide ("The Red Book"), Preferred Stock (Convertible vs. The more existing customers you can retain year on year, the more stable your growth and revenue will be moving forward. To Non-Gainsight customers 21 companies that did not use Gainsight and had at least three years of publicly available financial data. Expansion revenue and churned (or contraction) revenue are the two primary factors that impact a companys recurring revenue. Some of your customers upgrade adding $10,000 in revenue. Also referred to as net dollar retention (NDR), NRR considers upgrades, downgrades, and customer churn to indicate business growth potential from the current customer base. The two companies Company A and Company B have the following financials. Renewal and expansion directly correlate to the value a customer realizes throughout their tenure with your business. To calculate NRR, deduct your revenue churn (contract expirations, terminations and downgrades), add any expansion revenue and divide it by your renewable revenue. Net retention tells you how much revenue you're maintaining when revenue-increasing growth activity is part of the equation. This metric is called net revenue retention. NRR reflects your ability to retain and expand the monthly spend of customers, while GRR indicates only your ability to retain customers. On the other hand, Company B acquired zero new MRR in the month which we assumed for illustrative purposes. Churned MRRis the MRR lost from cancellations. You can ascertain patterns using the NPS survey to determine whether a customer is unhappy with your product and then use that information to ensure that they stick around for a longer period. 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