A measure of how recurring revenue from existing customers changes after expansion, contraction and churn.
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from an existing customer cohort over a given period, including upsells, cross-sells, downgrades, and cancellations.
If you didn't sign a single new customer for an entire year, would the money coming from your current customers grow, stay the same, or shrink?
Planting a tree that grows more fruit every year. In a high-NRR business, an existing client starts paying ₹10 lakh in Year 1, ₹13 lakh in Year 2, and ₹18 lakh in Year 3 as they adopt more modules.
Starting ARR from 100 clients: ₹10 crore. Expansion (upsells/seats): +₹2.5 crore. Contraction (downgrades): −₹0.5 crore. Churn (cancellations): −₹0.8 crore. Ending ARR = ₹11.2 crore. NRR = 112%.
An NRR above 100% means the business grows automatically from its installed base even before the sales team wins a single new logo. It is the purest sign of product value.
Institutional investors value recurring businesses primarily on NRR. An NRR of 120%+ commands a 2x to 3x valuation multiple premium over an identical company with 95% NRR.