Measuring Net Revenue Retention (NRR)
Learn how to measure the NRR of any customer segment with custom dashboards
Net revenue retention (NRR) is one of the most common KPIs Customer Success teams will measure their performance against, and for good reason as it helps CS teams understand if their revenue managed is expanding at a faster rate than any churn experienced.
NRR takes into account the total revenue under management at the start of a target period (typically monthly, quarterly, or annually), and then looks at the same set of customers and how much revenue they account for at the end of the period.
NRR is calculated with this formula: starting MRR + Change in MRR) / Starting MRR. For example, let's say you want to track your NRR for Q1. To do so, follow these steps:
- Look at your customers on Jan 1. Let's say you have 100 customers for a total of $1M ARR
- Look at that same set of customers on Apr 1. Note that it does not matter how many new customers you acquired in Q1 - we're only looking at revenue from the 100 customers you had on Jan 1.
- Let's say 10 customers churned for -$25K ARR
- Let's say 20 customers expanded for + $150K ARR
- Let's say 5 customers contracted for -$25K ARR
- To calculate your NRR for Q1, you simply divide the ARR of your 100 customers on Apr 1 divided by their ARR on Jan 1. In this example, we have 110% NRR:
- ARR from 100 customers on Mar 1: $1.1M ARR ($1M ARR - $25K churn - $25K contraction + $150K expansion)
- $1.1M / $1M = 1.1 * 100.0 = 110% NRR
With Vitally's custom dashboards, you can easily build reports that look at NRR across any segment of customers. Let's look at a few examples!
To measure NRR, you simply need to create a Widget that targets Accounts (or Organizations if using account hierarchy). While configuring the widget, you'll be able to select Net revenue retention (NRR) as the VALUE CALCULATION. You'll also be able to determine the timeframe to calculate NRR for.
To calculate the NRR of each CSM, simply build a widget that has these details:
- Visualization Type: Bar
- Visualization Data Object: Accounts or Organizations
- Group Y-Axis: Accounts/Organizations
- Account Property: CSM
Then, configure your Widget like the below, specifying the timeframe to calculate against:
To see your NRR in each Segment, follow the steps above for NRR per CSM, but instead of grouping by CSM, group by Segments instead.