Net revenue retention

ARR now from a set of customers over their ARR twelve months ago, including expansion, so it can exceed 100 percent. Decomposes into expansion, contraction, churn and reactivation. Gross retention is the same without expansion, capped at 100.

DefinitionARR now from a set of customers over their ARR twelve months ago, including expansion, so it can exceed 100 percent. Decomposes into expansion, contraction, churn and reactivation. Gross retention is the same without expansion, capped at 100.

Per cohort

The company figure hides the cohort that is failing. Compute per signing cohort and reconcile the sum to the bridge.

Reactivation

A churned customer returning is a cohort movement, not a new logo.

How it is computed

Recurring revenue now from customers who were active twelve months ago, divided by their recurring revenue then. New customers are excluded from both.

Example

Customers paying $7.1 million a year ago pay $7.3 million now: 103 percent. Gross retention, capping each at its prior figure, is 91 percent.

Where it goes wrong

New customers in the numerator. The figure becomes a growth rate and hides churn.

Articles that use this term

Territory, capacity and quota planning

Activity and outcome measures: which belong in compensation, and which do not

Why paying reps on activity measures produces activity and paying them only on outcomes produces sandbagging, the three tests a measure passes before it goes into a plan, the rep controls it, it cannot be gamed by logging, and it reconciles to a ledger, which coverage and outcome measures pass, which fail, the coverage-at-cadence exception that passes all three, and the identity that every credited dollar in a plan is a ledger dollar once.

16 Sept 20263 min read Board and management reporting

Concentration by industry: where a large top-ten share is normal, and where it is risk

Concentration is measured the same way everywhere, top-n share, count to half, the index, and what a high figure means depends on the desk: normal in a category with a few large buyers, a dependency in one with many. This hub gives, for twelve industries, what is concentrated, on which axis, what a typical top-ten share looks like, when it is a strength and when it is a risk, and the guide for each.

16 Sept 20263 min read Board and management reporting

Gross retention and net retention: the two tables that belong on one page

Why gross revenue retention and net revenue retention are computed on the same customers and answer different questions, gross capped at 100 percent as the leak, net with expansion as the growth from the base, the four combinations a cohort can show, leaking and growing, leaking and flat, tight and growing, tight and flat, what each means for where the next dollar comes from, the identity that ties both to the bridge, and why reporting either alone misleads.

16 Sept 20262 min read Board and management reporting

How to read a cohort retention table: the diagonal, the column, and the cohort that broke the pattern

A reading guide for a cohort retention table, rows by signing period and columns by months since signing: why the columns are read before the rows, the diagonal as the most recent data and the least settled, the cohort whose row falls faster than its neighbours, the too-young cohorts to leave alone, the difference between the gross and net versions of the same table, and the row to open, the one that broke the pattern in a column where its neighbours held.

16 Sept 20262 min read Board and management reporting · SaaS

Net revenue retention by cohort, reconciled to ARR

How a SaaS finance or revenue team computes net revenue retention per signing cohort from the subscription ledger, the four movements that make it up, expansion, contraction, churn and reactivation, the identity that ties every cohort's movements back to the ARR bridge, and why a single company NRR figure hides the cohort that is quietly failing.

16 Sept 20262 min read Board and management reporting

Renewal rate, retention rate and churn rate: three definitions that get swapped

The difference between renewal rate, retention rate and churn rate, which denominator each uses, why they do not add to 100 percent, how each is computed on customers and on revenue, the period and cohort rules that make them comparable, and a worked example where the three tell three different stories about the same quarter.

16 Sept 20262 min read