Here is how I calculate gross and net retention, and how I explain the difference. Gross revenue retention (GRR) is the share of recurring revenue you keep from existing customers after churn and downgrades. Net revenue retention (NRR) is the same calculation with expansion added back. The difference between gross retention and net retention is expansion: GRR leaves it out and can never go above 100%, NRR includes it and can. On a quarter that starts at $1,000,000 of ARR, GRR can be 88% while NRR is 103%.
Run your own numbers in the free NRR calculator. It returns both figures from the same inputs.
What is the net revenue retention formula?
GRR (%) = (S − C − D) ÷ S × 100
NRR (%) = (S − C − D + E) ÷ S × 100
S = recurring revenue (ARR or MRR) at the start of the period, existing customers only
C = revenue lost from customers who left
D = revenue lost to downgrades (fewer seats, a smaller plan)
E = expansion from the same customers (upsell, cross-sell, more seats, price increases)
New customers never enter either formula. Both follow a fixed group of existing revenue from the start of the period. Add new business and you turn a retention metric into a growth metric.
Gross retention vs net retention: one worked example
Gross retention vs net retention — same quarter
GRR = (1,000,000 − 120,000) ÷ 1,000,000 = 88%. NRR = (1,000,000 − 120,000 + 150,000) ÷ 1,000,000 = 103%. Growth looks healthy, but 12% of the base was lost.
Take a quarter that starts with $1,000,000 of ARR, with $80,000 of churn, $40,000 of downgrades and $150,000 of expansion:
- GRR = (1,000,000 − 80,000 − 40,000) ÷ 1,000,000 = 88%
- NRR = (1,000,000 − 80,000 − 40,000 + 150,000) ÷ 1,000,000 = 103%
Same customers, same quarter, two stories. NRR above 100% looks like growth. GRR at 88% says 12% of the revenue you started with is gone.
| Gross retention (GRR) | Net retention (NRR) | |
|---|---|---|
| Churn | Included | Included |
| Downgrades | Included | Included |
| Expansion | Excluded | Included |
| New customers | Excluded | Excluded |
| Maximum value | 100% | No ceiling |
| Question answered | Do we keep what we sold? | Does the existing base grow? |
Free download
Get the QBR template
Present GRR, NRR, adoption and risks to your customer's sponsor, slide by slide, with the closing decision that books the next quarter.
The download button appears here right away; nothing is sent to your inbox. Your email also joins Clarivoxx Insights (a weekly article and a monthly newsletter). Unsubscribe in one click. Privacy
Why the gap between GRR and NRR matters
The 15-point gap between NRR and GRR
A wide gap means growth depends on a few expanding accounts rather than a stable base.
Now split the same quarter by segment:
| Segment | Starting ARR | Churn | Downgrades | Expansion | GRR | NRR |
|---|---|---|---|---|---|---|
| Enterprise | $600,000 | $20,000 | $10,000 | $120,000 | 95.0% | 115.0% |
| Mid-market | $300,000 | $30,000 | $20,000 | $25,000 | 83.3% | 91.7% |
| Small business | $100,000 | $30,000 | $10,000 | $5,000 | 60.0% | 65.0% |
| Total | $1,000,000 | $80,000 | $40,000 | $150,000 | 88.0% | 103.0% |
The blended 103% comes almost entirely from enterprise. Mid-market and small business are both shrinking. That is the pattern I worry about most: a wide gap with low GRR means growth rests on a few accounts while the base leaks. Two other patterns are worth knowing:
- Narrow gap, high GRR: a stable base with modest growth.
- NRR below 100% with strong GRR: customers stay but do not grow. That is a value and account management question, not a churn question.
You can check each segment in the NRR calculator. For more GRR cases, see gross revenue retention with worked examples.
How do I calculate NRR and GRR in Excel?
Put starting ARR in column A, churn in B, downgrades in C and expansion in D, one row per segment or period.
GRR (E2): =(A2-B2-C2)/A2
NRR (F2): =(A2-B2-C2+D2)/A2
Gap (G2): =F2-E2
Format E and F as percentages. If you report quarterly, label it. Four quarters at 103% compound to about 112.6% only if the pattern holds. I prefer to measure the 12-month cohort directly: revenue today from customers you had a year ago, divided by their revenue a year ago.
What does a retention dashboard look like?
| Metric | Target | This month | Last month | Change |
|---|---|---|---|---|
| GRR (trailing 3 months) | ≥ 92% | 88.0% | 90.0% | −2.0 pts |
| NRR (trailing 3 months) | ≥ 110% | 103.0% | 104.0% | −1.0 pt |
| NRR − GRR gap | ≤ 10 pts | 15 pts | 14 pts | +1 pt |
| Downgrades | ≤ $25,000 | $40,000 | $31,000 | +29% |
Who owns which part of the formula?
From retention signal to owner
Each part belongs to a different team, which is why one blended figure rarely drives change:
- Downgrades usually mean the customer got value from only part of the product. That is an adoption problem for Customer Success.
- Full churn is often visible 60 to 90 days ahead through falling usage, open escalations or a lost sponsor. A customer health score model helps you see it in time.
- Expansion should be planned, timed after value is delivered and prepared in a quarterly business review. How to calculate expansion revenue covers that side.
What I've seen in practice
On one partner portfolio I looked after, NRR sat above 100% for several quarters and nobody worried. When I split the numbers by account, almost all the expansion came from two large partners. Behind them, smaller partners were downgrading one by one. The headline hid it until one of the large partners paused its growth.
Downgrades told us more than cancellations. In travel tech, a partner rarely leaves in one step. They first move part of their bookings elsewhere, and the revenue shrinks quietly. Watching downgrades account by account gave us months of warning. My rule now: when the gap is wider than 10 points, I list the accounts behind the expansion and the accounts behind the losses before anyone presents the headline.
The other mistakes I see: reporting NRR alone, mixing new business into the group, changing the definition between reports, and blending segments that retain very differently.
Frequently asked questions
Can gross retention exceed 100%?
No. Gross retention excludes expansion, so 100% means you lost nothing.
Is NRR above 100% the same as negative churn?
In practice, yes. Expansion outweighs the revenue lost to churn and downgrades.
Which should I report, GRR or NRR?
Both, side by side, with the gap stated. If you must lead with one internally, lead with GRR. It is the number your team influences most directly through onboarding, adoption and support.
How often should GRR and NRR be calculated?
Monthly or quarterly for reviews, plus a 12-month cohort view for planning, with the same definition every time.
Sources
- ChartMogul, Net Revenue Retention (NRR): NRR formula, cohort version and the NRR vs GRR comparison.
- ChartMogul, Gross Revenue Retention (GRR): GRR formula and why it caps at 100%.
- ChartMogul, SaaS Retention Report: retention by company size and why expansion can mask churn.
Practical takeaways
- GRR = (starting ARR − churn − downgrades) ÷ starting ARR; it excludes expansion and cannot exceed 100%.
- NRR adds expansion to the same group of customers, so it can exceed 100% while retention is weak.
- Never include new customers in either formula.
- Split by segment: a blended NRR above 100% can hide shrinking mid-market and small accounts.
Read next
How to Measure Customer Success Manager KPIs: The 12 I Track
The 12 customer success KPIs I put on a CSM scorecard, grouped into retention, adoption and growth, with formulas, targets and a worked example of one portfolio.
Read the article
Go further with the ebook
The Professional Customer Support Playbook
Better replies, fewer escalations, a clear path from agent to leader.
$19.99 · 103 pages · View the book