In the world of SaaS, growth is king — but it’s not just about acquiring new customers. One metric that separates high-performing SaaS companies from the rest is Net Revenue Retention (NRR). Why? Because NRR showcases how much a company can grow without selling a single dollar of new business. It reflects the true health of your customer base and your ability to drive expansion within it.
Why Is NRR So Important?
NRR measures the revenue retained from your existing customers, factoring in expansions, downgrades, and churn. It’s a holistic indicator of whether customers see enough value in your product to stick around and invest more over time. High NRR companies don’t just survive; they thrive — even in challenging markets.
But the significance of NRR goes beyond retention. It directly ties to a SaaS company’s growth trajectory. Companies with high NRR grow faster and achieve scale more efficiently, giving them a massive edge in today’s competitive market.
NRR and SaaS Growth Rates
Data from our 2024 SaaS Benchmarks Report is clear: SaaS companies with high NRR grow 2.5x faster than their low-NRR counterparts. This makes sense when you consider the compounding nature of retention and expansion revenue. Retaining and growing your existing customer base requires less capital and effort than acquiring new customers, and investors know this.
In fact, the market increasingly values growth metrics like NRR. Companies with exceptional NRR command premium valuations because they’ve demonstrated the ability to sustain and amplify revenue streams without excessive reliance on sales and marketing spend.
Why Top-Quartile NRR Matters
The difference between top- and bottom-quartile companies is staggering. Consider this example: Two companies, each starting with $20M in ARR. The top-quartile company with high NRR (higher than 106%) generates an incremental $4M in ARR through customer expansion. Meanwhile, a bottom-quartile company (less than 98%) loses $1M due to churn. To catch up, the bottom-quartile company must sell an additional $5M in new ARR — a far steeper hill to climb.
This illustrates how top-quartile NRR isn’t just a nice-to-have; it’s a significant advantage. It allows companies to invest resources more strategically, focus on long-term growth, and avoid the treadmill of constantly replacing lost revenue.
NRR SaaS Benchmarks in 2024
Understanding where your company stands in the NRR spectrum is crucial. Here are benchmarks to gauge what’s good versus great based on annual recurring revenue (ARR):
- <$1M ARR
- Good NRR: 100%
- Great NRR: 110%
- $1-5M ARR
- Good NRR: 100%
- Great NRR: 110%
- $5-20M ARR
- Good NRR: 105%
- Great NRR: 120%
- $20-50M ARR
- Good NRR: 103%
- Great NRR: 112%
- >$50M ARR
- Good NRR: 102%
- Great NRR: 107%
How Founders Can Impact NRR
Achieving high NRR isn’t an accident; it requires deliberate strategies. What’s easy now (“discounting” contracts) might make things harder in the future (renewals). And what’s hard to do now (multi-year contracts), might make things easier in the long run.
Here are four actionable ways founders can improve NRR:
- Improve Gross Revenue Retention by Reducing Churn: Identify the root causes of churn and proactively address them through better onboarding, customer success programs, and product improvements.
- Update Pricing & Packaging to Provide Natural Upsell Levers: Design pricing tiers and packaging that encourage customers to expand usage or unlock additional value as their needs grow.
- Negotiate Annual Increases for Renewals or Multi-Year Agreements: Build in annual price increases or offer incentives for longer-term contracts to ensure consistent revenue growth.
- Monetize New Core Product Features: Rather than bundling all enhancements into existing subscriptions, create opportunities for customers to pay for new features or premium versions of your product.
Closing Thoughts
Net Revenue Retention is more than a metric — it’s a growth engine. By focusing on retaining and expanding your customer base, you’re not just securing predictable revenue; you’re creating a compounding advantage that fuels long-term success. For SaaS companies looking to scale efficiently, improving NRR should be a top priority.
