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Gross Retention Rate (GRR) is the percentage of MRR which was not Lost over a given period. It measures the portion of recurring revenue retained from existing customers over a period, excluding any upsell or expansion revenue.
GRR is usually measured month-on-month and focuses only on revenue you keep, not revenue you gain. This metric is a great way to understand how sustainable your revenue streams are from a churn perspective. If you can see that your current customers continue to spend on your product, you can be more confident in your growth plans. A GRR of 90%+ over a year is considered good for a fast-growing company.
(Start of Period MRR - MRR Lost) / Start of Period MRR
To calculate GRR, subtract the Monthly Recurring Revenue (MRR) lost during the period from the MRR at the start of that period. Then, divide this result by the start of period MRR.
Regularly collect feedback to understand why customers churn or downgrade. Leading causes of churn are poor onboarding, weak customer relationship building, and poor customer service. So, be proactive with education and communication around your product. Invest in providing excellent customer service. If MRR is lost due to cost, consider revising your pricing or creating custom plans.
GRR is not just about preventing customer churn; it also involves minimising revenue contractions from existing customers. This includes addressing factors like downgrades and reductions in usage.
