The opposite of churn is retention!

Retention measures what percentage of a company’s customers continue paying for their service after a period of time, like a month or a year 😊

​But investors like to evaluate SaaS companies on a variation of this number: Net Revenue Retention.

Net Revenue Retention (NRR) measures the percentage of REVENUE retained from existing customers over a period of time, typically a year 💰

In other words, how much money will my existing customers pay me next year compared to this year?

Imagine I run a small meal prep company, and I have 100 customers that pay me $1,000/year to deliver them meals once a week 🍔

Over the next year, 10 customers churn, but 20 customers “upgrade” their membership to a price of $2,000/year – instead of getting meals once a week they get them twice a week 🍔🍔

While my retention rate is 90%, since 90 out of the original 100 customers are still paying me the next year, my NRR is actually 110%! 🤯

This is because from my existing 100 customers, I will make $110,000 next year, versus $100,000 this year, so I will “retain” 110% of my revenue from existin customers.

If a company’s NRR is over 100%, it means it is growing its revenue from the existing customer base and making more money from them over time, even if some of them churn!

High NRR can make it easier to grow revenue, because in general it’s almost always harder to go and find new customers, than to keep servicing existing ones 🛠️