What is the Net Revenue Retention Rate (NRR)?

Métricas e KPIs de SaaS

Understand Net Revenue Retention Rate (NRR) and its impact on your business. This guide covers calculation, factors influencing NRR, and strategies for improvement.

What is the Net Revenue Retention Rate (NRR)?

The growth of recurring income from current customers over a given period (often a year) is measured by Net income Retention (NRR), also referred to as Net Dollar Retention, Profit Retention Rate, or just “Net Retention.” This metric tracks a company’s revenue growth from its core customer base, considering upgrades, additional purchases, and customer churn (loss and downgrades). 

Business-to-business (B2B) software-as-a-service (SaaS) companies utilize NRR as a key metric to track their capacity to hold onto current clients, spur growth, and increase long-term profitability. 

Maintaining a Net Revenue Retention rate above 100% is crucial to prevent recurring revenue loss and ensure the company’s growth potential.

How do you calculate the Net Revenue Retention Rate?

For subscription-based organizations, the Net Revenue Retention Rate (NRR) is a crucial indicator of their capacity to keep and grow revenue from current clients over a given time frame. This is how to figure it out:

NRR = (MRR inicial + MRR de expansão - MRR cancelado) / MRR inicial

  • MRR inicial (receita recorrente mensal): A receita recorrente dos seus clientes existentes no início do período. 
  • MRR de expansão: Qualquer receita adicional gerada a partir de clientes existentes através de upsells, vendas cruzadas ou complementos durante o período.
  • Receita recorrente mensal perdida (MRR): a receita que não é mais recebida de clientes que cancelaram ou reduziram suas assinaturas dentro do prazo.

A NRR pode ser expressa como uma porcentagem multiplicando o resultado por 100.

Quais são os principais fatores que impactam a retenção líquida de receita (NRR)?

A rotatividade de clientes e a rotatividade de receita são os principais fatores que afetam a NRR.  

A company’s effectiveness in growing recurring revenue from its current clientele is gauged by its net revenue ratio (NRR). It focuses on how well businesses increase revenue from current clients while lowering revenue from churn. 

 

A high NRR shows steady growth and reliable value delivery since it shows that a business can retain clients and bring in more money from them over time. To obtain a comprehensive view of a company’s health, NRR should be taken into account in conjunction with other measures. 

How can improving customer experiences and satisfaction help increase Net Revenue Retention (NRR)?

NRR tends to be higher when customers have positive experiences and are satisfied. While positive customer experiences can contribute to increased spending, other factors may also play a role. 

To improve the customer experience, meeting and exceeding customer expectations is a critical aspect. Accomplishing this objective necessitates offering tailored experiences, first-rate customer service, and superior products and services. 

Dica

Regularly measuring NRR is essential for evaluating the results of your customer experience activities. By monitoring NRR over time, you can spot patterns and pinpoint any areas that need work.

What are the benefits associated with high net revenue retention (NRR)?

Many subscription-based firms strive for a high net revenue retention (NRR). Here is why:

  • Predictable Revenue: A higher net present ratio (NRR) indicates a more steady and predictable revenue stream, which facilitates forecasting and financial planning.
  • Custos de Aquisição de Clientes (CAC): Os custos associados à aquisição de clientes podem ser afetados pela retenção de clientes e pelo aumento das vendas para clientes existentes.
  • Influência do Cliente no CLTV: Fatores como satisfação do cliente e comportamento de gastos podem afetar seu valor vitalício, o que por sua vez pode impactar a lucratividade geral do negócio.
  • Crescimento Mais Forte: O crescimento composto é alimentado por uma alta NRR. Isso ocorre devido ao fato de que sua base de receita cresce naturalmente, o que promove um crescimento mais rápido e estável.
  • Melhor avaliação: Os investidores adoram uma alta NRR. Isso indica uma empresa forte com um produto comercializável e espaço para crescer, o que frequentemente resulta em avaliações mais altas.
  • Vantagem competitiva: Em geral, uma alta NRR indica que você está fazendo algo que seus rivais não estão.

Conclusão

A key indicator of how well subscription-based firms can hold onto and increase revenue from current customers is net revenue retention, or NRR. To monitor revenue growth from the core customer base, NRR takes upgrades, add-ons, and churn into account. Stronger growth potential, consistent revenue, lower client acquisition expenses, and happy customers indicate a high NRR. 

While enhancing NRR and acquiring a competitive edge can be facilitated by strong customer experience, the relationship between CX and these outcomes should be considered a possible correlation rather than a guaranteed effect. 

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