NRR vs GRR

NRR (Net Revenue Retention) and GRR (Gross Revenue Retention) are the two ways B2B SaaS companies measure how much of last year’s revenue is still here this year. NRR includes expansion; GRR doesn’t. Both matter — they answer different questions about the health of your existing customer base.

The formulas

GRR = (Starting ARR − Churn − Downsell) / Starting ARR
NRR = (Starting ARR − Churn − Downsell + Expansion) / Starting ARR

A team that started the year with $10M ARR, lost $1M to churn, lost $500K to downsell, and added $1.5M in expansion lands at:

• GRR = ($10M − $1M − $500K) / $10M = 85%
• NRR = ($10M − $1M − $500K + $1.5M) / $10M = 100%

What they tell you

• GRR tells you how leaky the bucket is. It’s capped at 100%. World-class is 95%+ for B2B SaaS; 90% is solid; below 85% is a retention problem.
• NRR tells you whether your existing customers are growing the account faster than they’re shrinking it. It’s not capped. World-class is 130%+; 110-120% is solid; below 100% means expansion isn’t covering the leak.

Why both matter

A team with 130% NRR and 80% GRR is masking a churn problem with expansion. The CFO loves NRR; the CRO should be alarmed by GRR. Investigate the churn cause before the expansion engine breaks.

A team with 95% GRR and 105% NRR has solid retention but weak expansion. Different problem — usually a packaging/upsell motion gap, not a product problem.

Common pitfalls

• Reporting NRR without GRR. Public companies do this; private companies shouldn’t. Boards need both.
• Cohort drift. NRR/GRR computed across the whole customer base hides cohort patterns. Compute by cohort (acquisition quarter, segment, ICP fit) for actionable insight.
• Multi-product attribution. When a customer adds Product B, is that “expansion” or “new ARR”? Document the rule and apply consistently.
• Currency conversion. Multi-currency ARR can swing NRR/GRR by exchange rates alone. Track in constant currency.

Targets by stage

These are B2B SaaS norms; vertical SaaS, infrastructure, and product-led companies have different distributions.

Related

• Pipeline velocity — new business side
• Forecast accuracy — projecting NRR forward