Net revenue retention (NRR)

Net revenue retention tracks how much revenue a fixed cohort of existing customers generates now compared to a starting point, typically a year earlier, excluding any revenue from customers acquired since then: (Starting ARR + Expansion - Contraction - Churn) / Starting ARR. Because it nets expansion revenue against contraction and churn, it can exceed 100%, meaning upsells and upgrades from the existing base more than offset customers who downgraded or left.

NRR differs from gross revenue retention, which strips out expansion and caps at 100%, isolating pure retention from any growth within the existing base. It also differs from total revenue growth, since NRR deliberately excludes new customers to isolate how well a company keeps and grows what it already has, one input into the growth side of the rule of 40.

NRR matters because it signals product stickiness and pricing headroom independent of the sales team's ability to close new logos: a business can survive, even thrive, on a shrinking new-customer count if NRR is comfortably above 100%. A common pitfall is comparing NRR across companies without checking the cohort window and whether contraction and churn are measured in the same way, since methodology differences of a few points are common.