How to calculate net revenue retention (NRR)

Net revenue retention (NRR) measures the revenue you keep and grow from your existing customer base over a period, leaving new customer revenue out entirely. The formula: NRR = (starting revenue + expansion revenue − contraction revenue − churned revenue) ÷ starting revenue, expressed as a percentage. An NRR above 100% means expansion is outpacing losses, even before a single new logo is signed.

Why NRR is different from churn rate

Churn rate tells you how much revenue you lost. NRR tells you the full picture: losses offset by growth from the same customers. A company can have real churn and still post a healthy NRR, if upsells and expansions from the accounts that stayed cover the gap. That's why B2B SaaS teams track both side by side rather than picking one. If churn rate is the metric you're missing, see how to calculate churn rate for B2B SaaS.

What counts as expansion and contraction

Expansion revenue covers anything that grows an existing account: seat upgrades, plan tier changes, add-on purchases. Contraction revenue covers the opposite, a downgrade or a reduction in seats that doesn't fully cancel the account. Churned revenue is the full loss from an account that cancels outright. Keeping these three buckets separate, rather than lumping everything into one "net change" number, is what makes NRR useful for diagnosing where the movement is actually coming from.

Start simple, before building a full revenue model

You don't need a finance-grade system to get a first NRR number. A spreadsheet tracking monthly recurring revenue per customer, updated on a set schedule rather than in real time, is enough to start. Pick one plan tier or customer segment first instead of trying to cover every pricing scenario at once. The goal is a smaller, reliable starting point, not a rougher or less accurate one: the data behind the number still has to be correct, only its scope stays narrow at first.

Once that manual process is solid and you're tired of rebuilding the spreadsheet every month, a shared view that pulls product usage and CRM data together, like Funnelsight's activation and retention dashboard, takes over the recalculation for you.