How does your business measure its success? Do you base it on the number of new subscriptions customers purchase from you each year? Or perhaps you rely on your financial health as a good indicator. Many businesses look at their gross revenue retention (GRR) to measure their success. In this blog, we will explain how to calculate gross revenue retention and what a good GRR is. While this blog will focus on GRR, we will also define net revenue retention (NRR) and compare gross revenue retention vs. net revenue retention . Then, we will introduce you to a software that will help you manage and grow your customers. Let’s get started.
What does Gross Revenue Retention mean?
Gross revenue retention measures the amount of revenue your business keeps after subtracting the amount lost due to customer churn and downgrades. Customer churn is the number of customers who ended services with your business. Downgrades occur when customers pay less than they did the previous time frame. New customers and upgrades are not factored into finding your GRR.
Your GRR is a great way to measure how happy your current customers are. If you see your gross revenue retention rate drop, it means that your customers might be unhappy with your business. Planhat offers solutions. We equip your team, and especially your Customer Success team, with the tools they need to keep customers happy so they’ll continue doing business with you (but more on that later).
How do you calculate Gross Revenue Retention?
To calculate your GRR, you will first have to determine what time period you want to measure retention for. You can choose to measure monthly revenue retention (MRR), quarterly revenue retention (QRR), or annual revenue retention (ARR). A good rule of thumb is to calculate it based on how often subscription payments are due. From there, you can plug your numbers into this formula (we will use MRR in the formula, but you can use either of the other types of revenue retention that you’d prefer):
GRR = (MRR - MRR lost due to customer churn - MRR lost due to downgrades) / MRR at the beginning of the month
To calculate your gross revenue retention rate, multiply your GRR by 100. The highest your rate can be is 100%.
As an example, let’s say that:
MRR = $25,000
Customer Churn = $500
Downgrades = $600
Using these numbers, the equation would look like this:
GRR = (25,000-500-600) / 25,000
Your GRR would be 0.956. When you multiply it by 100, you would get a GRR rate of 95.6%.
What is a good GRR rate?
What is considered a good revenue retention rate will vary depending on the size of your business. Here are the numbers you should strive for depending on your size:
Small/Mid-sized businesses (or selling to small- or medium-sized businesses): 80%
Enterprise businesses: 90%
Enterprise businesses with a high annual contract value (ACV): 95%
While a drop in your GRR rate may indicate that you have a problem on your hands, that is not always the case. Your rate may also change solely due to a lull in business.
What is the difference between Gross and Net Revenue Retention?
Improve your retention rate with Planhat
Founder
Scaale.io
Jonas is the founder of Scaale.io, a growth partner for B2B tech companies, and brings over a decade of experience across brand, media, and marketing strategy. Previously Director of Brand & Communications at Planhat, he helped shape the company’s global narrative and positioning from the early days. Before that, he ran Make Your Mark, a Stockholm-based agency delivering strategic content for brands like Klarna, Volvo, and Vattenfall. Earlier in his career, Jonas served as Editor in Chief at Aller Media, where he led the digital transformation of Sweden’s iconic lifestyle brand Café.
