What is the difference?

Net Revenue Retention Rate vs Net MRR Churn Rate

Net Revenue Retention Rate

Net MRR Churn Rate

What is it?

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. This churn metric gives a comprehensive view of positive as well as negative changes with respect to customer retention.

Read More arrow-right icon

Net Monthly Recurring Revenue (MRR) Churn Rate is the percentage change in MRR due to expansions, cancellations and downgrades. A negative Net MRR Churn Rate occurs when expansions exceed downgrades and cancellations and is a strong positive indicator of company health. This metric is typically expressed as a monthly rate although it can also be an annual rate: Net Annual Recurring Revenue (ARR) Churn Rate.

Read More arrow-right icon

Who is it for?

Customer Success Manager
Chief Revenue Officer
Sales Manager
Financial Analyst
Account Executive
Financial Analyst
Chief Revenue Officer
Chief Financial Officer
Customer Success Manager
Product Manager

Categories

SaaS
Customer Success
Metrics with Benchmarks
Sales
SaaS
Finance
Sales
Customer Success
Metrics with Benchmarks

Formula

ƒ Sum(MRR at the beginning of the period + expansion MRR during the period - downgraded MRR during the period - cancelled MRR during the period) / (MRR at the beginning of the period)
ƒ Sum(ARR at the beginning of the period + expansion ARR during the period - downgraded ARR during the period - cancelled ARR during the period) / (ARR at the beginning of the period)
ƒ Sum(renewing customers MRR or ARR) / Sum(MRR or ARR of customers due to renew)
ƒ Sum(downgraded MRR + cancelled MRR - expanded MRR) / (total MRR at the beginning of the month)

Example

Here's an example of how to calculate Net Revenue Retention (NRR). We'll call this scenario A: A company has 100 customers, each paying $2,000 per month. MRR at the beginning of the month is $200,000. Within the month, 1 customer adds a $4,000 MRR upgrade, 2 downgrade by $500 each, and 1 customer cancels. Based on the Net Dollar Retention formula, NRR = ($200,000 + $4,000 - ($500 x 2) - $2,000) / $200,000 = $201,000 / $200,000 = 100.5% expressed monthly Now let's look at Scenario B: Another company has 100 customers paying $20,000 for annual subscriptions. Within a one month period, 10 customers are due for renewal, only 9 actually renew, 1 adds a $5000 ARR upgrade, and 2 downgrade their subscription by $2000 each. Net Dollar Retention = ($20,000 x 9) + $5,000 - ($2,000 x 2)) / ($2,000 MRR x 10) = $19,000 / $20,000 = 95.0% expressed monthly

Example A: A company’s MRR is $50,000 with expansions of $7,000 and downgrades and cancellations of $10,000. The Net MRR Churn Rate is ($10,000 - $7,000) / $50,000 = 6.0% Example B: A company’s MRR is $100,000 with expansions of $12,000 and downgrades and cancellations of $7,000. The Net MRR Churn Rate is ($12,000 - $7,000) / $100,000 = -5.0%

Published and updated dates

Date created: Oct 12, 2022

Latest update: Mar 21, 2024

Date created: Oct 12, 2022

Latest update: Oct 12, 2022