Did you know that acquiring a new customer can cost up to 25 times more than retaining an existing one? This stark reality has shifted the focus of many SaaS businesses toward retention metrics as critical indicators of sustainable growth. Among these metrics, Gross Revenue Retention (GRR) and Net Revenue Retention (NRR) stand out as powerful gauges of business health and customer satisfaction.

These two metrics tell different but complementary stories about your revenue stability. GRR measures how well you maintain your baseline recurring revenue, excluding any revenue growth from existing customers. NRR, on the other hand, provides a more comprehensive picture by incorporating both retention and expansion revenue from your current customer base.

Jordan Silverman, Product Manager at SpotOn, shared at the Hyperengage Podcast that boosting retention is his top priority for increasing LTV, always choosing to retain before expanding.

“I think the best way to increase LTV is actually to attack retention before expansion. So that is my focus. First off is like if I if I have one thing, and I have to retain a customer or expand them, I’m always going towards retention.” – Jordan Silverman

For customer success teams, sales professionals, revenue operations specialists, and product managers alike, understanding the nuances between these metrics is essential for accurate forecasting and strategic planning. The central question we’ll address is: What distinguishes GRR from NRR, and why should your business track both?

Throughout this article, we’ll explore the definitions, calculations, and strategic implications of these vital metrics. You’ll discover how they reflect different aspects of customer health and how you can improve them with targeted strategies. By the end, you’ll have actionable insights to strengthen your retention rates and build a more predictable revenue foundation.

What is Net Revenue Retention (NRR)?

Net Revenue Retention (NRR) measures how successfully your company retains and grows revenue from existing customers over a specific period. This comprehensive metric captures the complete revenue picture by factoring in expansion revenue from upsells, cross-sells, and upgrades while subtracting losses from downgrades and cancellations.

Think of NRR as your revenue’s growth engine among current customers. Even when some customers reduce spending or leave entirely, strong expansion efforts with other customers can more than make up for these losses. For subscription-based businesses, a healthy NRR means you can achieve growth even without adding new customers to your roster.

The benchmark for NRR interpretation is straightforward but revealing:

• NRR below 100% means you’re losing more revenue than you’re gaining from existing customers
• NRR at exactly 100% indicates you’re breaking even, maintaining stable revenue
• NRR above 100% shows you’re growing revenue from your existing customer base

Why do investors and executives often call NRR the “north star” metric for SaaS companies? Because it simultaneously reflects customer satisfaction, product value, and expansion potential. A strong NRR suggests customers find enough value to increase their investment in your solution over time.

The significance of NRR extends beyond simple retention. It speaks volumes about your product-market fit, customer success initiatives, and ability to create additional value for customers. In competitive markets where customer acquisition costs continue to rise, companies with exceptional NRR rates enjoy significant advantages in profitability and sustainable growth.

Most top-performing SaaS companies maintain NRR rates between 110-130%, with some exceptional performers exceeding 140%. These numbers signal that these companies aren’t just keeping customers—they’re continuously expanding relationships and creating new ways for customers to extract value from their offerings.

How to Calculate Net Revenue Retention (NRR)

 

 

Calculating Net Revenue Retention requires tracking several specific revenue components and applying a straightforward formula. The standard NRR formula is:

NRR = (Starting MRR + Expansion MRR – Churn MRR – Downgrade MRR) / Starting MRR

Let’s break down each component to ensure accurate calculations:

• Starting MRR represents your baseline—the total recurring revenue at the beginning of your measurement period. If you’re tracking annually, you would use ARR (Annual Recurring Revenue) instead. This figure establishes your reference point against which all changes are measured.
• Expansion MRR encompasses all additional revenue generated from existing customers during the period. This includes upgrades to higher-tier plans, purchases of add-on features, increased usage in usage-based pricing models, and cross-sells of complementary products or services.
• Churn MRR quantifies the revenue lost from customers who cancelled their subscriptions completely during the period. This represents the most severe form of revenue loss since these customers no longer contribute any revenue to your business.
• Downgrade MRR captures the revenue reduction from customers who switched to lower-priced plans or reduced their seat count. While less severe than complete cancellation, downgrades still represent negative movement in your revenue stream.

To illustrate this calculation with a practical example, imagine your SaaS company starts a quarter with $500,000 in MRR. During that quarter, the following changes occur:

• Expansion: $75,000 in additional MRR from upsells and plan upgrades
• Churn: $25,000 in lost MRR from customers who cancelled
• Downgrades: $15,000 in reduced MRR from customers who downgraded

Applying our formula:

NRR = ($500,000 + $75,000 – $25,000 – $15,000) / $500,000

NRR = $535,000 / $500,000 = 1.07 or 107%

With an NRR of 107%, your company effectively grew its revenue from existing customers by 7% during the quarter, despite losing some revenue to churn and downgrades. This positive number indicates that your expansion efforts more than compensated for revenue losses.

Tracking NRR over multiple periods helps identify trends and seasonal patterns in your revenue behavior. A steadily increasing NRR suggests your expansion strategies are improving, while a declining NRR might indicate emerging customer satisfaction issues or challenges with your upsell approach.

What is Gross Revenue Retention (GRR)?

Gross Revenue Retention (GRR) focuses exclusively on how well you maintain your existing revenue base without considering any expansion revenue. Unlike its counterpart NRR, GRR strictly measures your ability to retain the revenue you already have by excluding all forms of revenue growth from the equation.

GRR answers a fundamental question: How sticky is your core product offering? By isolating retention from expansion, GRR provides a clearer picture of your product’s fundamental value and customer satisfaction levels. When customers continue paying for your core service without downgrading or cancelling, it demonstrates they receive consistent value from your offering.

The highest possible GRR is 100%, which would mean you retained every dollar of starting revenue from the beginning of the period. This ceiling exists because GRR, by definition, cannot exceed 100% since it excludes expansion revenue. Most successful SaaS companies aim for GRR rates of 90% or higher, though benchmarks vary by industry, company size, and customer segments.

Why does GRR matter when NRR seems more comprehensive? Because GRR functions as an early warning system for underlying product and customer satisfaction issues. A declining GRR often signals problems that might temporarily be masked by successful upsell efforts in your NRR figures. If customers are reducing their core commitment to your product or leaving entirely, even while some are expanding, you’re facing a foundational issue that requires attention.

For customer success teams, GRR serves as a purer measurement of retention effectiveness before sales and expansion efforts come into play. It helps isolate whether issues stem from the core product experience or from expansion strategies. A stable or improving GRR indicates that your fundamental value proposition remains strong, providing a solid foundation for growth initiatives.

Board members and investors scrutinize GRR closely because it reveals the stability of recurring revenue—the lifeblood of subscription businesses. A company with declining GRR may face increasing pressure to acquire new customers just to replace lost revenue, creating a costly treadmill effect that undermines profitability.

How to Calculate Gross Revenue Retention (GRR)

Calculating Gross Revenue Retention follows a similar structure to NRR but intentionally omits expansion revenue. The formula for GRR is:

GRR = (Starting MRR – Churn MRR – Downgrade MRR) / Starting MRR

This calculation provides a percentage that represents how much of your original recurring revenue remains after accounting for losses due to cancellations and downgrades. Let’s examine each component:

• Starting MRR establishes your baseline recurring revenue at the beginning of the measurement period. This includes all revenue from existing customers before any changes occur.
• Churn MRR refers to revenue lost from customers who canceled entirely during the period. This component represents complete customer losses and their associated revenue impact.
• Downgrade MRR captures revenue reductions from customers who moved to lower-priced plans or decreased their usage during the period. These customers remain active but contribute less revenue than before.

To demonstrate with a concrete example, let’s consider a B2B SaaS company that begins a month with $200,000 in MRR. During that month:

• $8,000 in MRR is lost from customers who canceled
• $12,000 in MRR is reduced from customers who downgraded their plans

Applying the GRR formula:

GRR = ($200,000 – $8,000 – $12,000) / $200,000

GRR = $180,000 / $200,000 = 0.90 or 90%

This 90% GRR means the company retained 90% of its starting recurring revenue during the month. The remaining 10% was lost through a combination of cancellations and downgrades.

For accurate GRR calculations, it’s crucial to maintain clean data that clearly distinguishes between different types of revenue changes. Many companies track these metrics on both monthly and annual bases, as seasonal patterns can significantly affect retention rates.

When interpreting GRR results, context matters. A 90% monthly GRR might sound reasonable, but it compounds over time. A consistent 90% monthly GRR would result in retaining only about 28% of your revenue after 12 months (0.90^12 = 0.282). This compounding effect highlights why even small improvements in GRR can dramatically impact long-term business health.

Regular GRR monitoring helps identify concerning trends before they become critical issues. If your GRR begins declining, it’s time to investigate customer feedback, support tickets, and usage patterns to understand the root causes of increased downgrades or cancellations.

Net Revenue Retention vs. Gross Revenue Retention: Key Differences & Why Both Matter

Technical Differences

 

 

The fundamental technical distinction between NRR and GRR lies in their treatment of expansion revenue.

• NRR includes both positive movements (expansions) and negative adjustments (downgrades and churn)
• GRR focuses exclusively on revenue maintenance, excluding expansion
• GRR can never exceed 100%, while NRR has no theoretical upper limit
• Both metrics focus on existing customers rather than new acquisitions

This difference in scope creates natural ceiling and floor effects. GRR can never exceed 100%, as it only measures retention of existing revenue without the potential lift from expansions. NRR has no theoretical upper limit—some hyper-growth SaaS companies achieve NRR rates of 140% or higher, indicating they grow their customer base revenue by 40% or more without adding new customers.

Both metrics share a common foundation in that they focus on existing customers rather than new acquisitions. This emphasis on the current customer base distinguishes them from growth metrics that might include new customer revenue. By isolating existing customer behavior, they provide clearer signals about product satisfaction and relationship strength.

Another technical nuance is the time horizon typically used for each metric. While both can be calculated for any period, GRR is often more valuable as a shorter-term indicator (monthly or quarterly), providing quick feedback on retention issues. NRR tends to show its true value over longer periods (quarterly or annually) as expansion opportunities often develop over extended customer lifecycles.

Strategic Implications

The strategic insights provided by these metrics complement each other in crucial ways. NRR serves as an overall health indicator for your existing customer base and offers a growth perspective. A strong NRR above 110% suggests that your company could theoretically grow without acquiring new customers—a powerful position for sustainable profitability.

GRR, meanwhile, functions as a more nuanced signal of fundamental product satisfaction and value delivery. When customers maintain their spending levels, it confirms that your core offering continues to meet their needs. A declining GRR, even when masked by strong upsells in your NRR, might indicate that your product’s foundation is weakening.

For investment decisions, these metrics guide different strategic priorities. A low GRR but high NRR might suggest investing in core product improvements or customer success operations to strengthen the foundation. Conversely, a high GRR but low NRR could indicate untapped expansion opportunities requiring better cross-sell programs or product enhancements that encourage upgrades.

How do economic conditions affect these metrics? During economic downturns, many businesses experience compression in both GRR and NRR as customers seek cost savings. However, companies with strong value propositions often see their GRR remain resilient even when NRR temporarily declines as expansion budgets freeze. This pattern can help distinguish between cyclical challenges and more concerning structural problems in your business model.

Why Both Metrics Are Essential

Relying on either metric alone creates serious blind spots in your understanding of business health. Consider a company with 120% NRR but 75% GRR—the strong expansion revenue from some customers masks a serious problem with core retention. Without tracking GRR, this company might miss the warning signs until too many customers have churned, making recovery much harder.

Similarly, focusing exclusively on GRR might lead to missed growth opportunities. A company satisfied with its 95% GRR might not recognize that competitors with similar GRR are achieving 130% NRR through effective expansion strategies. This growth gap compounds over time, creating significant competitive disadvantages.

At the Hyperengage Podcast, John Henwood, Head of Customer Success at Pocus, highlighted the importance of tracking both GRR and NRR to drive success across the full customer journey.

“We think about the impact of customer success along the whole customer journey from acquisition through to expansion. We have also looked at all the core retention metrics like gross retention. So I’ll be identifying expansion opportunities across our accounts.” – John Henwood

Together, these metrics create a balanced scorecard that helps leadership teams make better-informed decisions. GRR serves as the foundation metric that ensures your business isn’t losing its base, while NRR provides the growth perspective that drives long-term value creation.

Hyperengage brings together product usage data, customer feedback, and growth signals to give B2B SaaS teams a clear, unified view of each account. This makes it easier to spot churn risks early, surface expansion opportunities, and ensure CS efforts stay aligned with revenue goals.

For customer success teams, this dual focus translates into clearer priorities: maintain core product satisfaction to protect GRR while identifying and nurturing expansion opportunities to drive NRR. This balanced approach prevents the common mistake of chasing upsells at the expense of core satisfaction, which ultimately undermines both metrics.

How to Improve GRR and NRR: Leveraging Hyperengage

Strategies to Maximize Gross Revenue Retention (GRR)

Improving GRR requires a systematic approach focused on strengthening your core value delivery.

• Invest in a robust customer success function
• Create structured, comprehensive onboarding processes
• Develop standardized processes for consistent customer experiences
• Implement proactive monitoring of customer health indicators
• Provide self-service support resources
• Conduct regular check-ins and structured account reviews

First and foremost, investing in a robust customer success function creates a foundation for sustainable retention. When customers have dedicated support personnel who understand their goals and challenges, they’re more likely to overcome obstacles rather than abandoning your solution. This relationship-based approach transforms potential cancellations into opportunities for deeper engagement.

The onboarding experience deserves particular attention as it sets the trajectory for the entire customer relationship. Studies show that customers who experience a structured, comprehensive onboarding process are 3x more likely to renew their subscriptions. Creating interactive product walkthroughs that guide new users through key features helps them realize value faster. These guided experiences reduce the initial learning curve and accelerate time-to-value, addressing one of the primary reasons for early churn.

Consistency in customer experience across all touchpoints builds trust and reliability. Developing standardized processes for common customer interactions—from support requests to quarterly business reviews—ensures that every customer receives the same high-quality experience. This consistency is particularly important as your customer base grows and your team expands. Documented playbooks for handling different customer scenarios provide a framework that maintains quality as you scale.

Proactive monitoring of customer health indicators allows you to identify at-risk accounts before they consider canceling. Usage analytics that track login frequency, feature adoption, and user engagement provide early warning signs when accounts show declining activity. Setting up automated alerts when usage drops below certain thresholds enables timely interventions that can reverse negative trends before they lead to churn.

Self-service support resources empower customers to solve problems independently, improving satisfaction while reducing support burden. A comprehensive knowledge base with searchable articles, video tutorials, and step-by-step guides helps users overcome common obstacles without waiting for support responses. The ability to self-educate and troubleshoot creates a sense of mastery that strengthens the customer’s commitment to your platform.

Regular check-ins and structured account reviews maintain alignment between your solution and evolving customer needs. These touchpoints serve both to gather feedback and to remind customers of the value they’re receiving. Using these conversations to highlight underutilized features relevant to the customer’s goals can reignite engagement with your product and reinforce its importance to their operations.

Strategies to Maximize Net Revenue Retention (NRR)

Driving NRR growth requires a deliberate focus on expansion opportunities within your existing customer base.

• Adjust compensation structures to include expansion targets
• Segment your customer base by growth potential
• Implement data-driven customer health scoring
• Use contextual in-app messaging for timely expansion opportunities
• Leverage NPS surveys and feedback mechanisms

Adjusting compensation structures for customer success teams to include expansion targets creates alignment between individual incentives and company growth objectives. When success managers are rewarded not just for retention but also for account growth, they become more attentive to expansion signals and more proactive in pursuing appropriate upsell opportunities.

Segmenting your customer base by growth potential allows for more targeted expansion strategies. Analyzing factors like company size, industry, current usage levels, and growth trajectories helps identify which accounts have the highest expansion potential. This segmentation enables your teams to focus limited resources on accounts where expansion efforts will yield the greatest returns.

Data-driven customer health scoring provides objective insights into which accounts are prime for expansion versus which ones need retention focus. Comprehensive health scores that incorporate product usage, support interactions, contract values, and market factors create a more nuanced understanding of account status. These scores help prioritize outreach efforts and tailor conversations to each customer’s specific situation.

Contextual in-app messaging delivers timely expansion opportunities at moments of maximum relevance. When users repeatedly access premium features available in higher tiers or consistently reach usage limits, targeted messages can highlight the benefits of upgrading. This just-in-time approach connects expansion opportunities directly to experienced limitations, making the value proposition immediately apparent.

NPS surveys and other feedback mechanisms identify both detractors who need attention and promoters who may be receptive to expansion discussions. Following up promptly with detractors can address concerns before they lead to churn, while engaging with promoters often reveals untapped opportunities for growth. This systematic approach to feedback collection and response strengthens relationships while uncovering expansion paths.

Ziv Peled, Chief Customer Officer at AppsFlyer, explained at the Hyperengage Podcast that focusing on value first lays the foundation for strong relationships and high NRR.

“We focus on the value and then we go on the journey and we get to the relationships and it all builds to the net revenue retention.” – Ziv Peled

Conclusion

Gross Revenue Retention (GRR) and Net Revenue Retention (NRR) aren’t just numbers on a dashboard—they’re the clearest signals of how well your SaaS business is serving, retaining, and growing its customer base. GRR gives you a lens into the stability of your core offering, while NRR reveals whether you’re unlocking new value over time. Tracking both ensures you’re not just avoiding churn but actively building toward sustainable, predictable growth.

At Hyperengage, we help teams connect the dots between product usage, customer sentiment, and expansion signals—all in one place. Whether you’re optimizing onboarding, spotting upsell moments, or aligning CS with revenue, GRR and NRR should be your go-to benchmarks.