GRR vs. NRR: Key Differences and What Makes Them Important in SaaS

GRR vs. NRR: Measuring Sustainable Growth in SaaS

What’s the real measure of a thriving SaaS business — keeping customers or expanding their accounts?

When measuring revenue retention, two key metrics dominate the conversation: Gross Revenue Retention (GRR) and Net Revenue Retention (NRR). While both track recurring revenue, they serve different purposes:

• GRR focuses solely on customer retention by measuring revenue excluding upgrades or expansions.
• NRR captures both retention and growth, factoring in upsells, cross-sells, and expansion revenue.

Understanding GRR vs. NRR is essential for SaaS and subscription-based businesses looking to maximize revenue retention and long-term growth. This guide breaks down their key differences, how to calculate them, and when to prioritize each metric.

Key SaaS Revenue Concepts You Need to Know

Before diving into GRR and NRR, let’s cover a few foundational SaaS revenue terms:

• Monthly Recurring Revenue (MRR): The total predictable revenue a business generates from subscription customers each month.
• Churned Revenue: The revenue lost when customers cancel their subscriptions.
• Downgrade Revenue: The revenue lost when customers switch to a lower-priced plan.
• Expansion Revenue: Additional revenue generated from existing customers through upsells, cross-sells, and add-ons.

Why These Matter:

• GRR focuses only on retained revenue — it excludes expansion revenue.
• NRR includes both retained and expansion revenue, showing how much revenue is actually growing.

With these definitions in mind, let’s now look at how GRR and NRR are calculated.

What is Gross Revenue Retention (GRR)?

Gross Revenue Retention (GRR) measures the percentage of recurring revenue a business retains from existing customers, excluding upgrades, cross-sells, and expansions. GRR reflects a company’s ability to maintain its baseline revenue without relying on new sales.

Formula

Breaking Down the Formula:

• Starting MRR: Total recurring revenue at the start of the period.
• Downgrade Revenue: Revenue lost from customers switching to a lower-priced plan.
• Churned Revenue: Revenue lost from customers canceling their subscriptions.

Example Calculation

Let’s say a SaaS company starts the month with $100,000 MRR. During the month:

• Customers downgrade to lower-priced plans, reducing revenue by $5,000.
• Some customers churn, leading to a $10,000 revenue loss.

Using the GRR formula:

A higher GRR indicates stronger retention, while a lower GRR signals higher churn and downgrades. An 85% GRR means the company retained 85% of its recurring revenue from existing customers without counting upgrades or expansions.

Unlike GRR, NRR indicates whether a company is both retaining and growing revenue from existing customers.

What is Net Revenue Retention (NRR)?

Net Revenue Retention (NRR) measures how much revenue is retained and expanded from existing customers. It accounts for both lost revenue (churn & downgrades) and new revenue (upsells & expansions).

Formula

Breaking Down the Formula:

• Starting MRR: Monthly recurring revenue at the start of the period.
• Expansion MRR: Revenue gained from existing customers upgrading plans, purchasing add-ons, or increasing usage.
• Churned MRR: Revenue lost from canceled subscriptions.

Example Calculation

Using the same $100,000 MRR starting point:

• Customers generate $20,000 in expansion revenue (upsells and cross-sells).
• $10,000 churned revenue is lost.

Applying the NRR formula:

What NRR Tells You

NRR above 100% indicates that expansion revenue more than offsets churn, meaning the company is growing within its existing customer base. An NRR of 110% means that revenue from existing customers grew by 10% even after accounting for churn.

GRR vs. NRR: Key Differences at a Glance

Key Takeaway: If you want to measure pure customer retention, track GRR. If you want to track both retention and revenue expansion, monitor NRR.

GRR vs. NRR: Which Metric Should You Prioritize in Valuation?

GRR and NRR offer critical insights into a SaaS company’s revenue health, extending beyond retention analysis. GRR measures revenue stability, while NRR indicates growth within the existing customer base.

For analysts, these metrics inform forecasting, revenue modeling, and valuation. Tracking GRR vs. NRR over time reveals whether a business relies on new customer acquisition or sustainable expansion. Analysts who understand these metrics develop more accurate revenue models and valuations.

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Additional Resources

The SaaS Magic Number: A Guide to Calculation and Analysis

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