Net Revenue Retention - SaaS Metrics for Privately Held Companies

Below is one of the top universally tracked metrics we have seen in the market that strategic acquirers are focused on for privately held software companies. Prioritize this to have an edge during negotiations.

Net Revenue Retention (NRR) is a key metric for software companies looking to assess how sustainable their business’ revenue growth is and is the gold standard for tracking customer success. The volatility of the current market sees a shift away from growth-at-any-cost to a focus on sustainable growth, particularly among acquirers. Your monthly and annual recurring revenue (MRR)/(ARR) doesn’t show the full picture.

NRR is the cumulative total of retained, contracted, and expanded revenue over a set period, usually one month or one year. NRR calculates total revenue minus revenue churn (contract expirations, cancellations, or downgrades).  Anywhere above 100% is considered a good NRR, because it indicates growth via a consistent customer base and low churn rate.

Acquirers use NRR to assess the health and acquisition eligibility of a subscription business. In fact, for every 1% increase in revenue retention, a SaaS company’s value increases by 12% after five years, according to research from SaaS capital.

How is Net Revenue Retention Calculated?

How to increase Net Revenue Retention?

Invest in Customer Success - According to Gartner research, only 15% of customer interactions add value. Since Customer Success has shifted to own a bigger piece of the revenue pie, it’s a great opportunity to continue building on the team’s foundation of renewals, expansion, and growth. Upsell - Offer existing customers an upgraded version of your product or service Cross-sell - Increase your revenue from existing customers by introducing a new product