What is net revenue retention (NRR)?
Net revenue retention (NRR) is the share of recurring revenue a company keeps from an existing group of customers over a period, after adding expansion and subtracting downgrades and cancellations. It shows whether the current customer base grows or shrinks on its own, without any new sales.
How do you calculate net revenue retention?
Net revenue retention is the recurring revenue you have at the end of a period from the customers you had at the start, divided by what those same customers paid at the start.
NRR = (starting revenue + expansion − contraction − churned revenue) ÷ starting revenue × 100
- Starting revenue: recurring revenue (monthly or annual) from existing customers on day one of the period.
- Expansion: upgrades, added seats, extra usage and cross-sells from those customers.
- Contraction: downgrades and removed seats.
- Churned revenue: revenue from customers who cancelled.
Revenue from new customers won during the period is left out. Including it is a common mistake, and it inflates the number.
Worked example. On January 1 your existing customers pay $100,000 a year in recurring revenue. Over the year, some add seats and upgrade ($25,000 of expansion), some downgrade ($5,000 of contraction) and a few cancel ($10,000 churned). That leaves $110,000. NRR is $110,000 ÷ $100,000 × 100 = 110%. Anything above 100% means the base grew with no new sales.
Gross retention vs net retention: what's the difference?
Gross revenue retention (GRR) uses the same inputs but leaves out expansion. It shows how much revenue you keep, before any growth.
GRR = (starting revenue − contraction − churned revenue) ÷ starting revenue × 100
In the example above, GRR is ($100,000 − $5,000 − $10,000) ÷ $100,000 × 100 = 85%. GRR can never go above 100%; NRR can.
Read them together. NRR tells you whether the base is growing. GRR tells you how much is leaking. A high NRR with a weak GRR often means a few large accounts are expanding fast while many smaller ones leave, which hides a retention problem until the big accounts stop growing.
What is a good net revenue retention?
There's no single good number, and averages quoted without a segment mean little. NRR depends on:
- Segment and contract size. Larger customers have more room to add teams and seats; small businesses churn more and expand less.
- Pricing model. Seat-based and usage-based pricing let revenue grow as use grows. A flat plan has little room to expand.
- Contract length. Annual contracts limit when customers can leave or downgrade, which smooths the number.
- Time window. Twelve-month NRR on a cohort is the standard; shorter windows swing more.
Compare NRR across your own cohorts and segments over time. A rising line for customers who joined this year, against those who joined last year, says more than any outside figure.
How does product adoption drive NRR?
Expansion follows use. Customers add seats when more of their team gets work done in the product, and they move to higher tiers when they hit the limits of what they bought. Contraction and churn follow the opposite pattern: narrow use, a stalled rollout, a team that never got past setup.
So NRR is shaped early, by whether new users reach a real result. Foldspace's Product Agent works through setup and everyday tasks with each user in the product, which helps teams accelerate time to value, and Conversational Analytics lists the unresolved conversations and action gaps, phrased the way users asked, so a team can act on them before an account narrows its use.