NRR vs GRR: Understanding the Two Faces of Revenue Retention

NRR vs GRR: Understanding the Two Faces of Revenue Retention

When it comes to measuring the health and durability of a SaaS business, few metrics matter more than Revenue Retention.
But there are two distinct lenses through which to view it: Gross Revenue Retention (GRR) and Net Revenue Retention (NRR).

Together, they tell the full story — not just how much you keep, but how much you grow from your existing base.

At a Glance

Recommended Tool: Churn Calculator

1. The difference in one line

• GRR measures customer loyalty and product stickiness.
• NRR measures growth within your existing base.

A company can have strong NRR but weak GRR if it’s losing too many customers while aggressively upselling the ones who remain.
That’s why investors always ask for both.

2. How to calculate each

Gross Revenue Retention (GRR)

[GRR](/glossary#gross-revenue-retention-grr) = (Starting [ARR](/glossary#arr-annual-recurring-revenue) – [Churn](/glossary#churn) – Contraction) ÷ Starting [ARR](/glossary#arr-annual-recurring-revenue)

Net Revenue Retention (NRR)

[NRR](/glossary#net-revenue-retention-nrr) = (Starting [ARR](/glossary#arr-annual-recurring-revenue) – [Churn](/glossary#churn) – Contraction + Expansion) ÷ Starting [ARR](/glossary#arr-annual-recurring-revenue)

Example:
Starting ARR: $1,000,000

• Churn: $50,000
• Contraction: $50,000
• Expansion: $200,000

[GRR](/glossary#gross-revenue-retention-grr) = (1,000,000 – 100,000) ÷ 1,000,000 = 90%
[NRR](/glossary#net-revenue-retention-nrr) = (1,000,000 – 100,000 + 200,000) ÷ 1,000,000 = 110%

3. Why both matter

• GRR shows your baseline retention strength. It answers: “How much recurring revenue do we retain before upsells?”
• NRR shows your net growth efficiency. It answers: “Are our existing customers spending more over time?”

Together they highlight:

• Whether your product is essential (GRR).
• Whether your value expands with customer maturity (NRR).

If GRR is weak but NRR looks strong, your growth may be masking retention issues.

4. Benchmarks by stage

Best-in-class SaaS companies maintain GRR >90% and NRR >120% — meaning they grow revenue within their existing base by at least 20% annually.

5. Interpreting the relationship

Ideally, GRR and NRR move upward together. If they diverge, you’ve likely got retention or upsell concentration risks.

6. Why investors track both

Sophisticated investors use the combination of NRR and GRR to assess revenue quality.
A company with 130% NRR but 80% GRR may appear strong, but it relies too heavily on a small cohort of expanding customers.

They ask:

• Are upsells sustainable or driven by one-time events?
• Is the core product indispensable or optional?
• Does churn offset future expansion potential?

Retention quality matters more than temporary growth.

7. How to improve both metrics

To improve GRR

• Strengthen onboarding and customer education.
• Improve product reliability and support responsiveness.
• Target better-fit customers upfront (ICP alignment).

To improve NRR

• Expand product tiers and add-ons.
• Introduce usage-based pricing or account expansion programs.
• Invest in customer success as a revenue function.

To improve both

• Measure health scores and intervene early.
• Align incentives around retention and expansion, not just new sales.
• Create a customer feedback loop that informs product development.

See: Customer Success Playbook

8. Common pitfalls

• Reporting NRR without GRR — it hides churn concentration.
• Counting implementation or services revenue in retention.
• Comparing across business models (transactional vs. recurring).
• Measuring too frequently — quarterly data is more stable.

A single month’s churn event can distort your NRR snapshot; use rolling 3–6 month averages for clarity.

9. The retention stack: how it all fits

GRR is your foundation — NRR builds on top of it.
Healthy NRR can’t exist for long without solid GRR.

10. Founder takeaways

• Always track GRR and NRR together — not in isolation.
• Prioritise improving GRR first; NRR growth without retention is unsustainable.
• Review segment-level retention (SMB vs. Enterprise).
• Use NRR and GRR trends to inform pricing and product strategy.

A strong retention engine makes every other growth lever more efficient — CAC, burn, and payback all improve when customers stay longer and spend more.

Explore: Customer Success Playbook
Try: Churn Calculator
Assess: GTM Readiness Diagnostic

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