GRR vs NRR: What Each Retention Metric Tells You
By Ulas ArslanPublished Updated
Gross revenue retention, or GRR, measures how much recurring revenue you keep from an existing customer group before expansion. Net revenue retention, or NRR, includes expansion from that same group. Read them together: a strong NRR can coexist with meaningful customer revenue loss.
Keep the same customer group in both calculations
Choose a period and freeze the customer group at its start. Use a consistent recurring revenue basis, such as monthly recurring revenue. Follow that group to the end of the period, including customers that left. Do not replace lost accounts with newly acquired ones.
For annual reporting, you can compare the starting cohort’s recurring revenue at the start and end of the year. Keep the treatment of currencies, reactivations, price changes and account mergers documented. A change in definition can move the metric even when the customer experience stays the same.
The GRR and NRR formulas
GRR = (starting recurring revenue − churned revenue − contraction) ÷ starting recurring revenue × 100.
NRR = (starting recurring revenue − churned revenue − contraction + expansion) ÷ starting recurring revenue × 100.
Churned revenue comes from customers that leave. Contraction comes from customers that stay but pay less on the same recurring basis. Expansion comes from existing customers paying more, for example through additional seats or a larger plan. New-customer revenue belongs in a separate growth calculation.
| Revenue movement | Included in GRR? | Included in NRR? |
|---|---|---|
| Starting customer revenue | Yes | Yes |
| Customer cancellations | Subtract | Subtract |
| Downgrades or reduced seats | Subtract | Subtract |
| Expansion in the starting cohort | No | Add |
| New customers acquired later | No | No |
A worked example: 90% GRR and 108% NRR
Take a fictional cohort that starts with €100,000 in MRR. During the period, cancellations remove €6,000 and downgrades remove €4,000. The remaining customers add €18,000 through expansion. The figures are deliberately simple so you can check the calculation.
GRR is (€100,000 − €6,000 − €4,000) ÷ €100,000 = 90%. NRR adds the €18,000 expansion and becomes 108%. Both numbers are correct. The starting group now pays more overall, while €10,000 of its original recurring revenue has been lost.
An additional €20,000 of MRR from new customers would increase total company MRR, but it would not change either retention metric. Mixing it in would turn a retention measure into a growth measure.
What a healthy-looking NRR can hide
A few expanding customers can offset many smaller losses. That may still be a valid business result, but it asks a different operating question: are the accounts you lose concentrated in a segment, use case or acquisition cohort?
Separate expansion, contraction and cancellations before deciding where to intervene. If downgrades account for most losses, a generic cancellation playbook may miss the issue. Review whether customers purchased more seats than they needed or failed to reach the use case that justified the original plan.
Then compare customer-count retention. Revenue retention and customer retention answer different questions. A business can retain most of its customers while losing substantial revenue from a few large accounts.
Use the metrics without turning them into promises
A retention percentage describes an observed cohort under a chosen definition. It does not prove that one team or tool caused the result. To evaluate an intervention, compare similar cohorts, document the time window and account for changes in customer mix and pricing.
The customer success metrics guide places these figures beside leading operational measures. That helps connect the outcome to work the team can investigate, rather than treating a percentage as the whole story.
CLE Index explores how a customer revenue base changes under retention scenarios while excluding new sales and expansion. That scope is closer to the loss question behind GRR than to an NRR growth forecast. Its outputs are scenarios, not predicted revenue or guaranteed savings.