What is gross revenue retention?
Gross revenue retention definition and formula
Gross revenue retention reflects a company’s ability to retain customers. It is calculated by taking total revenue (excluding expansion) and subtracting revenue churn (contract expirations, cancelations, or downgrades). GRR does not account for expansion revenue, whereas net revenue retention does. GRR tends to decline over time, as most companies’ customer bases shift and become more diverse as they grow, which creates more opportunities for customer churn.
Gross revenue retention formula
|Gross Revenue Retention =||Monthly Recurring Revenue (MRR) at Start of Month – Churn – Contractions|
|MRR at Start of Month|
Gross revenue retention example
Your business enters January with monthly recurring revenue (MRR) of $27,000. Your business exits January with $5,000 in revenue churn due to contract expirations. Your gross revenue retention (GRR) for January is 81% ($22,000 ÷ $27,000).
Positive and negative implications of measuring only GRR
Measuring only GRR — focusing exclusively on customer retention (vs. retention and expansion) — can have positive and negative implications. On the positive side:
- Product experience matters. When retaining every customer matters, companies put a greater emphasis on the product experience and soliciting and applying customer feedback.
- A GRR focus reinforces a customer-centric approach. Greater importance is placed on your ideal customer profile, positioning, messaging, and outreach strategy to prevent signing bad-fit customers, which means more collaboration between Customer Success, sales, and marketing.
Conversely, on the negative side:
- All customers are treated equally. With a GRR focus, large and small customers hold the same value. This approach makes GRR a more straightforward metric manage, but a one-size-fits-all experience does not work for all customers.
- SaaS retention benchmarks: How does your company compare? ChurnZero webinar featuring Rob Belcher, managing director at SaaS Capital
- Net revenue retention vs. gross revenue retention explained, Cori Pearce, ChurnZero
- Key SaaS and Customer Success metrics you should care about with You Mon Tsang, CEO and co-founder, ChurnZero and Dave Kellogg, Dave Kellogg Consulting