Gross revenue retention / Gross retention rate (GRR)
Definition
The Gross revenue retention (GRR) is used to understand how well your business retains its customers. Simply put, it’s the percentage of revenue that a company keeps each month.
Gross revenue retention is a valuable metric for companies to track because it provides insight into how much revenue is being retained each month. Additionally, gross revenue retention can be used to predict future revenue growth. For example, if a company has a Gross revenue retention of 90%, it’s doing a good job of retaining its existing customers, and can spend less time dealing with a revenue retention problem.
How is Gross revenue retention / Gross retention rate (GRR) calculated?
It's calculated by taking a company's total revenue and subtracting the revenue from new customers
The formula for calculating Gross revenue retention / Gross retention rate (GRR) is:
GRR = (Existing MRR - Revenue Churn) / Existing MRR *100
Example:
If a company has $1 million in existing monthly recurring revenue and $400,000 in monthly recurring revenue churn, its gross revenue retention would be:
Existing MRR: $1 million
MRR Churn: $400,000
GRR = 60%
Why is Gross revenue retention / Gross retention rate (GRR) important to measure?
This metric is important because it shows how well a company is retaining its existing customers and growing its business with them. If a company has high gross revenue retention, it's a good sign that its customers are happy and that it's doing a good job of upselling and cross-selling to them.
If you're looking at a company's financials, be sure to calculate this metric to get a better understanding of the business.
What is a typical GRR for a subscription business?
Typically, a successful subscription businesses GRR will sit between 80 and 100%, with variations for businesses with similar value products and business age.
What is the difference between GRR and NRR?
Let’s look at the 2 calculations side-by-side:GRR = (Existing MRR - Churn MRR) / Existing MRR *100NRR = (Existing MRR + Upgrades MRR - Downgrades MRR - Churn MRR) / Existing MRR *100Gross revenue retention focuses on how well a business retains existing customer revenue, but ignoring any upgrades and downgrades within the period. Whilst Net revenue retention includes both upgrades and downgrades within the rate calculation, to factor in how the business is retaining and expanding existing customer revenues.
How can I increase the GRR of my subscription business?
First, take a look at your pricing. If you're not charging enough for your product or service, you're not going to be able to keep much of the revenue you bring in. Make sure you're priced competitively and that you're making a profit on each sale.Second, focus on providing great customer service. If your customers are happy, they're more likely to continue doing business with you. Make sure you're responsive to their needs and that you're always working to improve the customer experience.Finally, work on building a loyal customer base. The more customers you have who keep coming back, the more revenue you'll be able to retain. Focus on creating a brand that people can trust and that they'll want to keep doing business with.If you can increase your gross revenue retention, you'll be in a much better position to grow your business. Keep these tips in mind and you'll be on your way to success.
