The Metrics That Actually Move Net Revenue Retention (NRR)

Everyone talks about NRR, but don’t go into the details that make this metric up. In this week’s newsletter, we will unpack everything about NRR. 

NRR has become the north star for modern SaaS companies, and for good reason. It reflects not just your ability to retain customers, but to grow with them. It’s a true litmus test for product-market fit, customer success, and overall go-to-market execution.

But here’s the problem:

Most teams treat NRR like a single number on a dashboard, rather than a composite metric that’s deeply influenced by a handful of controllable factors. Without viewing everything underneath the NRR metric you may have some problems that are being masked!

Let’s break down the four key metrics that actually move NRR, and why understanding them is the first step to improving it.

First, What Is Net Revenue Retention?

Net Revenue Retention (NRR) =

(Starting MRR + Expansion MRR - Contraction MRR - Churned MRR) / Starting MRR

It tells you how much revenue you’ve retained including upsells and cross-sells, and excluding any new customer revenue.

An NRR > 100% means your existing customers are growing with you.

An NRR < 100% means you’re shrinking, even if your logo count looks healthy.

The 3 Metrics That Move NRR

1. Gross Churn Rate

This is the clearest drag on NRR. It measures the percentage of recurring revenue lost due to customers fully churning. Even if you have a NRR over 100% but have a poor GRR that expansion is masking you still have a problem. 

Formula: Churned MRR / Starting MRR

🔍 What to watch that can impact GRR:

• Poor onboarding experiences

• Lack of product adoption

• Gaps between buyer expectations and value delivery

• Poor executive alignment

Pro tip: Track churn by cohort and segment to isolate where it’s creeping in. See the bottom of the newsletter for more details around viewing Cohort reports. 

2. Contraction

Customers who don’t churn completely but downgrade or reduce licenses, are silently pulling NRR down. You may also have some customers who contract down to the very lowest tier possible, these are like a full churns and something to keep your eyes on. 

📉 Why it matters:

Contraction is often a leading indicator of bigger problems like:

• Weak product stickiness

• Shifting use cases

• Budget tightening

Action: Review contraction reasons quarterly and tie them back to account health trends.

3. Expansion

This is the magic number that lifts NRR. It’s one of my favorites:)  Expansion includes upsells, cross-sells, and increased usage depending on your pricing model. 

🚀 What drives expansion:

• Proactive success plans tied to business goals

• Usage insights that fuel tailored upsell plays

• A strong partnership between Sales, CS, and Product

Pro tip: Track expansion by segment and CSM to understand what’s working at the front lines.

Why Cohort Reports Are Your Secret Weapon

As mentioned above Cohort reports can be very helpful when looking at Churn. If you’re not using cohort reports to analyze GRR or NRR, you’re flying blind.

A cohort report groups customers by a shared starting point, usually their start date and tracks key behaviors over time, such as:

• Retention rate

• Expansion trends

• Contraction and churn patterns

🔍 How to Read a Cohort Report

Let’s say you group customers by onboarding month.

Each row shows a cohort (e.g. January 2025 customers).

Each column shows what happens over time (month 1, month 2, month 3…).

A strong cohort report might show:

• Consistent retention after month 6 = Good onboarding and stickiness

• Contraction in months 4–6 = Potential issue post-implementation

• Expansion increasing after month 9 = Room to run upsell plays

✅ What to Look For

• Are newer cohorts performing better than older ones?
  
  If yes, your onboarding, support, or product has improved.
  

• Are certain segments expanding earlier?
  
  Double down on what’s driving that behavior.
  

• Is churn happening at a predictable time?
  
  That’s your trigger to insert a success play, 1:1, or QBR before the drop-off.

📈 How This Helps NRR

Cohort reports let you zoom out and separate the signal from the noise.

Instead of reacting to one churned customer, you’re spotting patterns across customer groups, so you can fix root issues at scale.

And when you start tracking expansion, contraction, and churn by cohort, it becomes crystal clear which levers are moving NRR.

Final Thought

NRR isn’t just a number, it’s a reflection of your entire customer experience. By breaking it down into controllable inputs, you give your team the power to take action, not just report lagging indicators.

Want to lead your CS team like a revenue leader?

Start tracking the metrics that actually move the needle.