How To Calculate Revenue Retention

Net revenue retention takes into account the total revenue minus any revenue churn caused by departing customers or customers who have downgraded plus any revenue expansion from upgrades cross sells or upsells.

How to calculate revenue retention. So the formulae for calculating net revenue retention rate is. And annual recurring revenue arr is the annualized version of mrr. Nrr prior period revenue revenue expansion revenue contraction prior period revenue we recently wrote an article on customer and revenue retention that includes more details and examples. You can calculate it by multiplying mrr by 12.

How to calculate net revenue retention rate. You only need to consider the recurring portion of the revenue and leave aside the one off payments or other charges. Net revenue retention is the macro metric that most companies track and public saas companies report. Net revenue retention equals b a.

Again net revenue retention focuses just on your existing customer base. I hold an active tennessee cpa license and earned my undergraduate degree from the university of colorado at boulder and mba from the university of iowa. The company s monthly recurring revenue mrr one year ago. Nrr can be calculated at any time but is usually looked at on an annual or monthly basis.

Net revenue retention explains the net movement inflow outflow of arr mrr within your existing customer base. Net revenue retention nrr looks at the net revenue left over from your existing customers in a set time period. Both arr and mrr give insight into your business s sustainable income stream. Nrr a b c d a.

To put this in an example let s assume company a had a monthly recurring revenue of 50 000 they expanded their business through upgrades and cross sell at 5000. I ve been a saas cfo for 8 years and began my career in the fp a function. The of active users continuing to subscribe divided by the total active users at the start of a period retention rate. How to calculate gross revenue retention rate ƒ sum rr recurring revenue at the beginning of the period downgraded rr during the period cancelled rr during the period rr at the beginning of the period what is a good gross revenue retention rate benchmark.

The current mrr from that same group of customers. As a side note this is not cohort analysis which is something similar but different. The maximum possible value for gross revenue retention rate is 100. Ben murrayi have worked in finance and accounting for 25 years.