Work net revenue retention without fooling yourself
Calculate NRR and interpret what kind of retention story produced it.
A SaaS company starts the quarter with $1,000,000 of recurring revenue from an existing customer base. During the quarter it loses $70,000 to churn, loses $50,000 to contraction, and gains $180,000 from expansion. NRR = (starting revenue - churn - contraction + expansion) divided by starting revenue. The novice move is to look only at the final net percentage and skip the shape of the gains and losses that produced it. Step 1 Start with the base: $1,000,000 in beginning recurring revenue. NRR is always measured against the same starting cohort or base. Step 2 Subtract losses: $1,000,000 - $70,000…
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