Understanding your business’s financial health goes beyond just looking at new sales. The key to sustained growth for subscription-based businesses lies in retaining and expanding customer revenue, which is why Net Revenue Retention (NRR) becomes a crucial metric.

Why NRR Matters:
Net Revenue Retention measures the percentage of recurring revenue retained from customers in a given period, considering upsells, cross-sells, downgrades, and churn. A strong NRR signifies a healthy business, product value, and customer satisfaction.

Variables to Consider:

Subscription Best Practices:
You may notice from the variables above that there's an expectation that subscriptions that increase/decrease their monthly amount do so by updating the dollar value of their original subscription. After consulting with hundreds of businesses on recurring revenue, we've certainly come across numerous businesses whose process is to cancel one subscription just to immediately create a new subscription at either a higher or lower dollar amount. Taking this latter approach throws off your churn, average duration, stick rate, lifetime value, and even new customer reports. We highly recommend improving your processes to update the existing subscription record when a subscriber is either increasing or decreasing their spend with you instead of canceling their subscription.

Calculating NRR:
To calculate NRR, you subtract the revenue lost from churn and downgrades from the revenue gained through new customer revenue and existing customer expansions and then divide by the total revenue at the start of the period. This result, multiplied by 100, gives you the NRR percentage. A rate over 100% is a beacon of business health, showing that your growth from existing customers outweighs any losses.

Graphly Simplifies NRR Reporting:
As you can see, there are many factors in calculating NRR; it's a constantly moving target as performance improves or declines in any of the seven variables. Recognizing the importance of this metric, we’ve developed the Net Revenue Retention Report. This report can be configured just once but will provide ongoing updates, automating the calculation and providing you with instant insights into how well you’re maintaining and expanding your customer base. No more manual calculations or spreadsheets, just insights that help you strategize and act.

Two Views, a Graphly First
This report is so valuable that we decided to build the ability to choose between a chart and a table. For those who want a quick reference, "are we positive or negative, and by how much?", choose the chart option. For others who want the nitty-gritty breakdown to see where improvements can be made, select the table option. Some users may do both and place reports side-by-side or one on top of the other.

Predicting Future Growth with NRR Forecast:
Alongside our NRR report, we’ve introduced the Net Revenue Retention Forecast Report. This forward-looking report lets you input various NRR rates to project future revenue growth. By setting different NRR goals, you can see potential future outcomes, aiding in strategic planning and goal setting.

These two new reports are designed to empower your business with the data needed to make informed decisions that drive retention and growth. They underscore our commitment to providing tools that track your business’s past and present and predict and improve your future.

Experience the new standard in revenue retention analysis with Graphly today and see why effective NRR management is a game-changer for your business.

Set up your Net Revenue Retention and Forecast Reports Now

* This update includes similar-sounding and looking terms: NRR (Net Revenue Retention) and MRR (Monthly Recurring Revenue). While confusion between the two acronyms comes more often from verbal discussions, we wish to note the distinction here.