This article is shared here from Ron’s LinkedIn post.

Understanding NRR vs GRR: The Key Metrics for SaaS Growth

By Ron Griguts

In the dynamic world of SaaS, understanding the right metrics can be the difference between thriving and merely surviving. Two of the most crucial metrics in this arena are Net Revenue Retention (NRR) and Gross Revenue Retention (GRR). Let’s break them down:

Net Revenue Retention (NRR): This metric considers the revenue retained from existing customers, including upsells, cross-sells, and downgrades, minus churn. A high NRR indicates that your company is not just retaining customers but is also expanding their value over time. It’s a clear sign of product-market fit and customer satisfaction.

Gross Revenue Retention (GRR): GRR measures the percentage of revenue retained from existing customers, excluding any expansion revenue (upsells or cross-sells). It strictly looks at how well you’re keeping your existing revenue base, offering a pure view of customer retention.

Why These Metrics Matter:

  • NRR gives insights into your company’s growth potential from existing customers. An NRR over 100% is a strong indicator of healthy growth.
  • GRR helps you understand the effectiveness of your customer retention strategies. It shows the true retention rate without the noise of additional sales.

Key Takeaways:

  1. Balanced Focus: While a high NRR is fantastic, maintaining a strong GRR ensures you’re not losing customers even as you grow.
  2. Customer Experience: Both metrics highlight the importance of a stellar customer experience and the role of customer success teams.
  3. Strategic Decisions: Use NRR to gauge expansion efforts and GRR to refine retention strategies.

In the competitive SaaS landscape, mastering these metrics can provide a strategic edge. By focusing on both NRR and GRR, you can ensure robust and sustainable growth.

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