The formula
NRR = (Starting ARR + Expansion - Contraction - Churn) / Starting ARR
The result is a ratio. Multiply by 100 to express as a percentage. NRR of 1.18 means 118% - you grew your existing customer base by 18% net of all losses.
The four inputs
- Starting ARR. Your annualized recurring revenue at the beginning of the period. For trailing-4-quarters NRR, that's ARR exactly four quarters ago.
- Expansion ARR. Upsell, cross-sell, and price increases on existing customers in the period. Excludes new logos.
- Contraction ARR. Downsells and price decreases from existing customers (e.g., a customer drops from 100 seats to 60).
- Churn ARR. ARR lost from full customer cancellations in the period.
Worked example
A Series B fintech SaaS company at the start of the trailing 4 quarters:
- Starting ARR: $10,000,000
- Expansion: $1,800,000 (upsells + price increases)
- Contraction: $300,000 (seat reductions)
- Churn: $700,000 (two enterprise cancellations)
NRR = (10,000,000 + 1,800,000 - 300,000 - 700,000) / 10,000,000
NRR = 10,800,000 / 10,000,000 = 108%
That places this company below the median Series B fintech SaaS NRR of around 114% in our benchmark.
Edge cases
- Price increases count as expansion in standard practice.
- New logos never count toward NRR. They're new ARR, not retention.
- Discounts that expire are expansion if billed at the higher rate; not if you only intended a temporary promo.
- Currency conversion: pick a single reporting currency and stick with it.