GRR vs NRR 2025: Complete Guide to Choosing...

Gross Revenue Retention (GRR) and Net Revenue Retention (NRR) are often confused, used interchangeably, or applied in wrong contexts—leading to poor strategic decisions and misleading investor communications. A 2024 SaaS Capital survey found that 35% of SaaS companies report only one retention metric, and 20% use inconsistent definitions that make benchmarking impossible. Yet the choice between GRR and NRR isn't arbitrary—each metric answers fundamentally different questions and drives different strategic actions. GRR measures your ability to keep existing revenue (capped at 100%)—it's your "defensive" metric showing how well you prevent churn and downgrades. NRR measures total revenue change from existing customers including expansion (can exceed 100%)—it's your "net" metric showing complete existing-customer economics. A company with 85% GRR and 115% NRR is losing 15% of base revenue to churn but more than compensating through expansion. That's very different from 95% GRR and 100% NRR, where retention is strong but expansion is nearly zero. Both companies have the same "growth from existing customers" but vastly different underlying dynamics. This comprehensive guide explains exactly what each metric measures, when to use which, how to calculate both correctly, and how to present retention metrics to different stakeholders. Whether you're building your metrics dashboard, preparing for fundraising, or diagnosing retention problems, this guide ensures you're using the right metric for the right purpose.

Understanding GRR and NRR Definitions

Before comparing these metrics, establish precise definitions that clarify exactly what each measures and how they relate to each other.

Gross Revenue Retention (GRR) Defined

Gross Revenue Retention measures the percentage of recurring revenue retained from existing customers, excluding expansion. GRR Formula: GRR = (Starting MRR − Churned MRR − Contracted MRR) / Starting MRR × 100. GRR is capped at 100%—you can never retain more than 100% of starting revenue when expansion is excluded. Example: Starting MRR: $100,000. Churned MRR: $5,000. Contracted MRR: $3,000. GRR = ($100,000 − $5,000 − $3,000) / $100,000 = 92%. This 92% GRR means you kept 92% of your starting revenue from existing customers, losing 8% to churn and contraction combined. GRR answers: "What percentage of our revenue base do we retain before any growth from expansion?"

Net Revenue Retention (NRR) Defined

Net Revenue Retention measures the percentage of recurring revenue retained from existing customers, including expansion. NRR Formula: NRR = (Starting MRR − Churned MRR − Contracted MRR + Expanded MRR) / Starting MRR × 100. NRR can exceed 100% when expansion outweighs churn and contraction. Example: Starting MRR: $100,000. Churned MRR: $5,000. Contracted MRR: $3,000. Expanded MRR: $15,000. NRR = ($100,000 − $5,000 − $3,000 + $15,000) / $100,000 = 107%. This 107% NRR means your existing customer base generates 7% more revenue than it did at the start, despite losing some customers. NRR answers: "What is the net revenue change from our existing customer base, including both losses and gains?"

The Mathematical Relationship

GRR and NRR are mathematically related through expansion: NRR = GRR + (Expansion Rate). Where Expansion Rate = Expanded MRR / Starting MRR × 100. Example: GRR: 92%. Expansion Rate: 15% (expansion = $15,000 on $100,000 starting MRR). NRR = 92% + 15% = 107%. This relationship reveals important insights: If NRR > GRR, you have meaningful expansion (healthy growth motion). If NRR ≈ GRR, you have little expansion (growth depends on new customer acquisition). If GRR is low but NRR is high, you're compensating for churn with expansion (potentially masking a churn problem). Understanding this relationship helps diagnose what's driving your retention performance.

Key Differences Summarized

GRR characteristics: Capped at 100%, excludes expansion revenue, measures defensive retention only, shows your "floor" retention performance, directly reflects churn and contraction. NRR characteristics: Can exceed 100%, includes expansion revenue, measures complete existing-customer economics, shows your "net" retention performance, combines defensive (churn) and offensive (expansion) performance. Critical distinction: A company can have terrible GRR (high churn) but great NRR (expansion compensates). These companies look healthy by NRR alone but may have serious underlying churn problems that become catastrophic if expansion slows.

The Hidden Story

NRR alone can hide serious problems. A company with 70% GRR and 115% NRR loses 30% of customers annually but covers it with expansion. If expansion slows (market saturation, competitive pressure), that 70% GRR becomes the dominant reality. Always know both metrics.

When to Use GRR

Gross Revenue Retention is the primary metric for specific contexts where understanding pure retention (without expansion) matters most.

Diagnosing Churn Problems

Use GRR when you need to understand and address customer attrition independent of expansion. GRR isolates the retention problem: When you're investigating why customers leave, expansion data is noise. GRR shows exactly how much revenue you lose to churn and downgrades. Comparing GRR across segments: Which customer segments have retention problems? A segment with 75% GRR needs urgent attention even if company NRR looks healthy because other segments expand. Tracking retention initiatives: Did your new onboarding program reduce churn? GRR changes show retention impact directly, while NRR might be affected by unrelated expansion changes. Example: Your NRR is 105%, but GRR is 82%. You implement a customer success program. GRR improves to 88% while NRR stays at 105% (expansion declined slightly). GRR shows the success program worked; NRR masked the improvement.

Evaluating Product-Market Fit

GRR is the purer signal of whether your product delivers ongoing value to customers. Product-market fit indicator: If customers consistently renew at high rates (high GRR), your product solves a real, ongoing problem. Low GRR suggests the product isn't sticky—customers don't find enough value to continue paying. Expansion can mask fit problems: High NRR from expansion might come from adding features that increase prices, not from customers loving the core product. If those customers then churn, you had pricing expansion without retention. Early-stage focus: For early-stage companies still validating product-market fit, GRR matters more than NRR. First prove customers want to stay, then optimize expansion. High NRR with low GRR at early stage is a warning sign.

Investor Due Diligence Context

Sophisticated investors examine GRR specifically because it reveals risks that NRR hides. Why investors want GRR: It shows the "worst case" if expansion stops. A company with 115% NRR but 80% GRR has expansion-dependent growth—risky if expansion slows. GRR benchmarks for investment: Below 80%: Major concern—losing 20%+ of base annually. 80-85%: Acceptable for high-expansion businesses. 85-90%: Good—solid retention foundation. Above 90%: Excellent—strong product-market fit. When pitching investors: Report both GRR and NRR. Hiding GRR raises red flags. If GRR is weak, acknowledge it and explain your improvement plan.

Operational Capacity Planning

GRR informs operational decisions about customer success and support investment. Customer success ROI: GRR improvement directly measures customer success impact. If CS investment improves GRR from 85% to 90%, you can calculate the revenue saved and ROI. Support capacity needs: High churn (low GRR) means more offboarding, win-back attempts, and churn analysis. Low GRR drives higher support workload even if NRR looks healthy. Renewal forecasting: GRR gives more conservative renewal forecasts. For capacity planning, use GRR-based projections to avoid over-commitment based on expansion assumptions that might not materialize.

GRR Rule of Thumb

Target 85%+ GRR minimum for sustainable SaaS. Below 85%, you're losing revenue faster than most expansion motions can reliably compensate. If your GRR is below 80%, fixing retention should be the top priority—no amount of expansion makes up for customers fleeing.

When to Use NRR

Net Revenue Retention is the primary metric when you need to understand complete existing-customer economics including growth.

Measuring Total Customer Economics

NRR captures the full picture of existing-customer value creation. Complete revenue story: NRR shows whether your existing customer base is growing or shrinking overall. A 110% NRR means existing customers generate 10% more revenue annually—compounding value. LTV implications: NRR directly affects customer lifetime value. High NRR means customers become more valuable over time, not just through retention but through expansion. Unit economics assessment: For understanding CAC payback and ROI, NRR provides the complete picture. A customer acquired for $10,000 with 115% NRR generates increasing returns each year.

Growth Planning and Forecasting

NRR is essential for revenue forecasting and growth planning. Revenue projections: Starting MRR × NRR gives expected revenue from existing customers next period. Add new customer acquisition for total growth projection. Growth rate decomposition: Total revenue growth = New customer contribution + Existing customer contribution (NRR - 100%). Understanding this breakdown helps prioritize acquisition vs expansion investment. Market expansion capacity: High NRR means you can grow significantly without proportional acquisition investment. Low NRR means growth depends heavily on continuous new customer acquisition.

Investor Communication

NRR is the standard metric for SaaS company valuation and investor communication. Industry standard: When investors and analysts discuss "net revenue retention," they mean NRR including expansion. This is the benchmark comparison metric. Valuation driver: Companies with NRR above 120% command premium valuations. NRR above 100% indicates sustainable growth without depending entirely on new customer acquisition. Public company reporting: Public SaaS companies report NRR prominently. Benchmarking against public comparables requires using NRR consistently.

Expansion Motion Validation

NRR validates whether your expansion strategy actually works. Expansion effectiveness: The gap between NRR and GRR shows expansion contribution. If NRR - GRR is growing, your expansion motion is strengthening. Pricing strategy validation: Price increases, tier upgrades, and add-on sales should improve NRR. Declining NRR suggests expansion strategies aren't working. Land-and-expand model proof: If your GTM strategy depends on landing small and expanding, NRR is the proof point. NRR below 100% means land-and-expand isn't working—customers aren't expanding after landing.

NRR Target Ranges

Target 100%+ NRR as baseline—existing customers should at least maintain revenue. Elite SaaS targets 120%+. However, high NRR built on low GRR is fragile. Sustainable high NRR requires solid GRR foundation (85%+) plus strong expansion motion.

Using Both Metrics Together

The most valuable insights come from analyzing GRR and NRR together, understanding what each reveals about your business.

The Four Retention Quadrants

Plot your business on GRR (x-axis) vs NRR (y-axis) to understand your retention profile. High GRR + High NRR (top right): Strong retention AND expansion. Best position—sustainable growth from satisfied, expanding customers. Example: 92% GRR, 115% NRR. High GRR + Low NRR (bottom right): Strong retention but limited expansion. Customers stay but don't grow. May need expansion motion development. Example: 92% GRR, 95% NRR. Low GRR + High NRR (top left): Expansion compensates for churn. Fragile—depends on continued expansion to mask retention problems. Example: 78% GRR, 108% NRR. Low GRR + Low NRR (bottom left): Weak retention AND expansion. Business model may be fundamentally challenged. Example: 78% GRR, 85% NRR.

Diagnostic Questions

Use both metrics together to diagnose your retention health. If GRR is low and NRR is high: Why are customers churning? Are you masking churn with expansion? What happens if expansion slows? Can you improve GRR while maintaining NRR? If GRR is high and NRR is low: Why don't customers expand? Is there expansion potential you're not capturing? Are you priced appropriately for value delivered? If both are low: What's causing churn and blocking expansion? Is this a product, pricing, or customer success problem? Where do you start—fix retention first, then build expansion? If both are high: How do you maintain this? Are there segments where this breaks down? What's your sustainable advantage?

Trend Analysis

Track both metrics over time to understand trajectory and identify emerging issues. Healthy trends: GRR stable or improving, NRR stable or improving. Your retention foundation is solid and expansion is working. Warning trend 1: GRR declining while NRR stable. Expansion is masking worsening churn. Eventually expansion can't keep up. Warning trend 2: GRR stable while NRR declining. Retention is fine but expansion is weakening. May indicate market saturation or competitive pressure on expansion. Crisis trend: Both GRR and NRR declining. Immediate attention required—your customer base is deteriorating on both dimensions.

Segment-Level Analysis

The most valuable insights come from analyzing GRR and NRR by segment. Segment breakdown examples: Enterprise vs SMB: Enterprise often has higher GRR but lower expansion rate (already paying full price). SMB may have lower GRR but higher expansion potential. Cohort-based: Newer cohorts vs older cohorts. Are recent customers retaining better or worse than historical? Product line: Different products may have very different retention profiles. Acquisition channel: Do customers from certain channels retain better? Action from segments: Identify segments with strong GRR + NRR for investment, segments with problems for intervention, and segments where the business model doesn't work for potential exit.

The Complete Picture

Report both GRR and NRR in your executive dashboard. GRR shows your defensive performance (keeping customers), NRR shows your total customer economics (keeping + growing). Together they reveal whether growth is sustainable or fragile.

Stakeholder-Specific Presentation

Different stakeholders need different retention metrics emphasized based on their concerns and decisions.

Board and Investor Presentations

For governance and fundraising contexts, present both metrics with appropriate framing. Standard presentation: Lead with NRR as headline metric (industry standard). Show GRR immediately after to demonstrate retention foundation. Include trend over 4-8 quarters for both. If NRR > 100% but GRR < 85%: Acknowledge the gap explicitly. Explain why churn is elevated and what you're doing about it. Show GRR improvement trajectory if applicable. Avoid hiding GRR—sophisticated investors will ask. Benchmark context: Include industry benchmarks for comparison. Top-quartile B2B SaaS: 115%+ NRR, 90%+ GRR. Median B2B SaaS: 100-105% NRR, 85% GRR.

Customer Success Teams

For teams focused on retention and expansion, emphasize actionable metrics. Primary metric: GRR for retention-focused teams, as it directly measures their impact on preventing churn. Secondary metric: Expansion rate (NRR - GRR) for teams with expansion goals. This isolates expansion performance from retention. Segment-level detail: Provide GRR and expansion rate by segment so teams can prioritize accounts. Leading indicators: Complement lagging retention metrics with leading indicators: Product usage, support tickets, NPS, engagement scores that predict future GRR.

Sales and GTM Leadership

For go-to-market leaders, connect retention to acquisition and expansion strategy. Expansion focus: Emphasize NRR and expansion rate. Show which customers expand, when expansion typically happens, and what drives it. Land-and-expand validation: If GTM strategy depends on expansion, NRR is the proof point. Show expansion rates by initial deal size, customer segment, and time since acquisition. CAC payback context: Show how retention metrics affect payback. High NRR accelerates payback; low GRR extends it. Use this to inform target customer profiles.

Product and Engineering

For product teams, connect retention to product decisions. Feature-level impact: Which features correlate with higher GRR? Show retention by feature adoption to guide product investment. Churn reasons: What product gaps cause churn? Connect GRR problems to specific product opportunities. Expansion drivers: What features enable expansion? Show which product capabilities correlate with customer upgrades. Cohort quality: Are product changes improving retention? Compare GRR across cohorts before and after major releases.

Know Your Audience

Investors want NRR for valuation context but will dig into GRR for risk assessment. Operations teams need GRR for retention focus. Sales teams care about expansion rate. Always lead with the metric most relevant to your audience, but have both ready.

Common Mistakes and Best Practices

Avoid these common errors when using GRR and NRR, and follow best practices for accurate, actionable retention metrics.

Mistake: Using Only One Metric

The error: Reporting only NRR (most common) or only GRR, missing the complete picture. Why it's a problem: NRR alone can mask serious churn problems. GRR alone misses the value of expansion motion. Either metric in isolation leads to incomplete strategic decisions. Example: Company reports 108% NRR, looks healthy. But GRR is 75%—losing 25% of base annually, compensating with aggressive expansion. If expansion slows (market saturation, recession), the 75% GRR becomes the dominant reality. Best practice: Always calculate and track both GRR and NRR. Report both to stakeholders, even if you emphasize one for specific contexts. The relationship between them is as important as either number alone.

Mistake: Inconsistent Definitions

The error: Using different definitions for the same metric across periods, teams, or reports. Why it's a problem: Inconsistent definitions make trending meaningless. Comparing your 110% NRR to a benchmark's 105% NRR is meaningless if definitions differ. Internal confusion leads to poor decisions. Common inconsistencies: Including/excluding certain customer types in cohort. Treating downgrades as churn vs contraction. Timing of when expansion/churn is recognized. Whether to use monthly or annual calculation. Best practice: Document precise definitions for both GRR and NRR. Specify cohort rules, timing, and what's included/excluded. Apply consistently across all reporting. When definitions must change, restate historical data.

Mistake: Confusing GRR and NRR in Communication

The error: Calling GRR "net retention" or NRR "gross retention," or using undefined "retention rate." Why it's a problem: Creates confusion with investors, board members, and benchmarks. May lead to comparing your GRR to others' NRR (apples to oranges). Example: "Our retention rate is 95%." Is that GRR (great) or NRR (concerning)? The statement is meaningless without clarification. Best practice: Always specify "gross revenue retention" or "net revenue retention" explicitly. Never use undefined "retention rate." When presenting, briefly define what each metric includes to ensure alignment.

Best Practices Summary

Follow these practices for retention metrics excellence. Track both: GRR and NRR, monthly and annually, by segment. Document precisely: Written definitions including cohort rules, timing, inclusions/exclusions. Trend over time: At least 4-8 quarters of history to identify patterns. Segment analysis: By customer size, product, cohort vintage, acquisition channel. Reconcile to totals: GRR/NRR calculations should reconcile to actual revenue changes. Regular audits: Quarterly methodology review and validation against raw data. Clear communication: Always specify which metric, always provide context, always show both.

The Golden Rule

If someone asks "what's your retention?" always respond with both numbers: "Our GRR is 88% and NRR is 112%." This immediately signals sophistication and provides complete information. Never report just one number without context.

Frequently Asked Questions

Can GRR ever exceed 100%?

No, GRR is mathematically capped at 100%. GRR measures retained revenue excluding expansion, so the maximum is retaining 100% of starting revenue (no churn, no contraction). If your calculation shows GRR above 100%, you have a methodology error—likely including expansion revenue that should only appear in NRR. Some teams accidentally count price increases as "retained revenue" rather than expansion. Any revenue increase from existing customers is expansion and belongs in NRR, not GRR. GRR = 100% means perfect defensive retention—you kept every dollar of starting revenue. That's exceptional and rare; most healthy SaaS companies have GRR between 85-95%.

Which metric should we show investors first?

Lead with NRR as it's the industry standard for SaaS valuation discussions and allows direct comparison to benchmarks and public companies. However, immediately follow with GRR. Sophisticated investors will ask for GRR if you don't provide it—not having it ready raises concerns. Present as: "Our NRR is 115%, built on GRR of 90%." This shows complete existing-customer economics and demonstrates you understand both metrics. If your GRR is weak (below 85%), address it proactively: explain the drivers, show your improvement plan, and demonstrate that you understand the risk. Trying to hide weak GRR backfires when investors dig into the numbers during due diligence.

How should we handle customers who churn and then return?

The standard approach treats returned customers as new customers, not retained customers. When a customer churns (MRR goes to $0), they exit the retention cohort and count as churned for that period's GRR and NRR. If they later return, their new subscription counts as new customer acquisition, not expansion or retention. They start in a fresh cohort from their return date. This approach prevents "win-back" revenue from artificially inflating retention metrics. If win-backs are significant for your business, track them as a separate metric ("win-back rate" or "win-back revenue") rather than mixing them into retention calculations. Some companies argue returning customers should count as retention. The problem: this creates inconsistent cohorts and makes benchmarking impossible. Standard practice excludes them from retention.

Should we calculate GRR and NRR monthly or annually?

Calculate both, as they serve different purposes. Monthly GRR/NRR: More sensitive to short-term changes. Good for operational monitoring and early warning detection. Can be volatile, especially with smaller customer counts. Annualized: Monthly rate to the 12th power (e.g., 99% monthly GRR = 88.6% annual GRR). Annual GRR/NRR: Smoother and less noisy. Standard for investor reporting and benchmarking. Most industry benchmarks use annual figures. Captures full contract cycle for annual billing. Recommendation: Track monthly for operational purposes, report annual for strategic and investor communication. Always clarify whether a figure is monthly or annual—they're not comparable without conversion.

How do we improve GRR without sacrificing NRR?

Improving GRR while maintaining NRR requires addressing churn causes without eliminating expansion opportunities. Investigate churn reasons: Exit surveys, churn analysis by segment, and customer success reviews reveal why customers leave. Address root causes (product gaps, poor onboarding, unmet expectations) rather than symptoms. Segment intervention: Focus retention efforts on segments with lowest GRR. High-value customers at risk need proactive outreach. Early warning systems can identify at-risk customers before they churn. Maintain expansion motion: Don't lock customers into contracts that prevent expansion. Continue developing features that drive upgrades. Keep sales and CS aligned on expansion opportunities. The key insight: GRR and NRR aren't trade-offs. Reducing churn (improving GRR) often enables more expansion (maintaining NRR) because retained customers have more time to grow.

What if our GRR is strong but NRR is weak?

High GRR with low NRR (say 92% GRR with 95% NRR) indicates strong retention but limited expansion. Customers stay but don't grow. Potential causes: Product doesn't have natural expansion paths, pricing already captures full value at initial sale, customer base is fully penetrated (no room to grow), sales/CS teams aren't focused on expansion. Strategic options: Develop expansion paths: Add-ons, higher tiers, usage-based components, adjacent products. Review pricing: Are you underpriced initially and missing expansion opportunity? Or are you capturing full value upfront? Sales motion adjustment: Train sales to "land smaller, expand later" rather than maximizing initial deal. CS expansion focus: Arm customer success with expansion playbooks and incentives. Note: High GRR with low NRR isn't necessarily bad. Some businesses are designed for full upfront value capture with strong retention. It's problematic only if your growth model depends on expansion that isn't happening.

Disclaimer

This content is for informational purposes only and does not constitute financial, accounting, or legal advice. Consult with qualified professionals before making business decisions. Metrics and benchmarks may vary by industry and company size.

Key Takeaways

Gross Revenue Retention and Net Revenue Retention are complementary metrics that together provide a complete picture of existing-customer economics. GRR measures defensive retention—how well you prevent churn and downgrades—and is capped at 100%. NRR measures total existing-customer economics including expansion—and can exceed 100% when customers grow faster than they churn. Use GRR when diagnosing churn problems, evaluating product-market fit, and understanding your retention "floor." Use NRR when forecasting revenue, communicating with investors, and measuring total customer value creation. Use both together to understand whether high NRR is built on solid retention (sustainable) or masks a churn problem (fragile). The most important practice: always know and report both metrics. Companies that report only NRR (or worse, undefined "retention rate") appear either unsophisticated or like they're hiding something. Sophisticated stakeholders expect both figures and understand what each reveals. Target 85%+ GRR as your retention foundation and 100%+ NRR as your existing-customer growth target. Track both over time, by segment, and relative to benchmarks. This dual-metric approach ensures you understand and can communicate the true health of your customer base.

Natalie Reid