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Formula
NRR = (Starting MRR + Expansion - Churn) / Starting MRR
Know your metric
Importance of
https://docs.google.com/spreadsheets/d/1qJDC1yrBOgR1H9-Ny8QTrA6ltEZ7N3NInm0Vj5onEbw/copy
Crucial for understanding customer health and long-term revenue sustainability.
Financial Health Indicator
Directly reflects the company’s ability to retain and grow revenue from existing customers, indicating overall financial health.
2. Customer Loyalty Insight
Provides insights into customer loyalty and product/service satisfaction.
Predictive of GrowthHigh
NRR rates are often predictive of sustainable long-term growth.
Drawbacks of
https://docs.google.com/spreadsheets/d/1qJDC1yrBOgR1H9-Ny8QTrA6ltEZ7N3NInm0Vj5onEbw/copy
Does not account for new sales, focusing only on existing customers.
Ignores New Business
Doesn't reflect new customer acquisitions, which can also be crucial for growth.
2. Can Mask Issues
A high NRR might mask issues in other areas like new business development or product innovation.
3. Complexity in Calculation
Requires accurate tracking of upgrades, downgrades, and churn, which can be complex to manage.
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