Net Revenue Retention (NRR)

Revenue from a group of existing customers now, divided by revenue from the same customers a year earlier, including upgrades and subtracting cancellations and downgrades.

Example

Customers who paid 1,000,000 last year now pay 1,150,000: NRR is 115%.

Important

Above 100% means existing customers grow the business even without new sales.

Related terms

  • Annual Recurring Revenue (ARR) — The yearly value of subscription or contracted revenue that is expected to repeat.
  • Churn Rate — The share of customers or revenue lost over a period.

Lessons that explain it

  • If one customer can leave, measure what leaves with them — Customer concentration shows how much revenue depends on a few customers. Measure the share of the largest customers and what happens to the business if one leaves. (9 min)
  • The list price is a claim; the realised price is the evidence — Pricing diligence compares list prices with what customers actually pay, checks discounting patterns and looks for evidence that customers would accept higher prices. (10 min)
  • SaaS lives on retention; marketplaces live on liquidity and take rate — Software businesses are judged on recurring revenue, expansion and margins. Marketplaces are judged on whether buyers and sellers reliably find each other, and how much of each transaction the platform keeps. (12 min)
  • A revenue multiple for a young company needs three adjustments — Once a startup has revenue, it is often valued as a multiple of it. Borrowing public or late-stage multiples requires adjusting for growth, size and illiquidity before the number means anything. (11 min)
  • Product-market fit shows up in behaviour, not in enthusiasm — Product-market fit means a specific group of customers needs the product badly enough to keep using it, pay for it and recommend it. It is visible in retention and organic demand, not in praise. (10 min)

All 578 terms in the Investing glossary