Net Revenue Retention Rate vs Net MRR Churn Rate

Net Revenue Retention Rate (NRR) and Net MRR Churn Rate are inverse metrics that measure the same underlying customer revenue dynamics from opposite perspectives, yet each provides unique strategic insights for SaaS businesses. NRR measures what percentage of revenue you retain and grow from a customer cohort over time, with values above 100% indicating net expansion and below 100% showing net contraction. Net MRR Churn Rate, conversely, calculates the net percentage of MRR lost from existing customers in a given period, accounting for both gross churn (lost customers) and expansion revenue (upgrades/upsells) that offsets those losses. Mathematically, they're related: if your NRR is 110%, your Net MRR Churn Rate is -10% (negative churn, meaning expansion exceeds losses).

The strategic value lies in how each metric frames decision-making and communication. NRR is inherently forward-looking and growth-oriented, making it ideal for investor presentations, long-term planning, and demonstrating product-market fit strength. It answers "How much are we growing our existing revenue base?" Net MRR Churn Rate is more operationally focused and problem-oriented, helping teams identify revenue leakage and prioritize retention efforts. It answers "How much revenue are we losing, and is our expansion offsetting it?" While a 115% NRR sounds impressive to investors, a -15% Net MRR Churn Rate immediately signals to operations teams that expansion efforts are successfully overcoming customer losses. Use NRR for strategic growth discussions and Net MRR Churn Rate for tactical retention and expansion optimization.

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.

Net Monthly Recurring Revenue (MRR) Churn Rate is the percentage change in MRR from existing customers 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 calculated as an annual rate: Net Annual Recurring Revenue (ARR) Churn Rate.

Who is it for?

Customer Success Manager

Chief Revenue Officer

Sales Manager

Financial Analyst

Account Executive

Chief Executive Officer

Business Intelligence Analyst

Financial Analyst

Chief Revenue Officer

Chief Financial Officer

Customer Success Manager

Product Manager

Chief Executive Officer

Business Intelligence Analyst

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 starting 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 starting MRR is $100,000 with expansions of $12,000 and downgrades and cancellations of $7,000. The Net MRR Churn Rate is ($7,000 - $12,000) ÷ $100,000 = -5.0%

Published and updated dates

Date created: Oct 12, 2022

Latest update: Aug 8, 2025