Gross Revenue Retention, sometimes referred to as GRR, is a measure of the revenue a SaaS company retains from its existing customers over a given period.
Gross Revenue Retention is important for several reasons. First, it helps SaaS companies understand the health of their existing customer base. By tracking ARR, you can identify trends in customer churn and downgrades and take steps to improve customer retention. Additionally, ARR can help you forecast revenue for the coming year, which is essential for budgeting and planning.
Finally, ARR is a valuable metric for investors and stakeholders. It indicates the stability and predictability of your revenue stream and can help you attract additional funding.
To calculate Gross Revenue Retention, you need to know the revenue generated from your existing customer base over a given period. Here's the formula:
Gross Revenue Retention = ((Beginning Revenue - Churn & Downgrade Revenue) / Beginning Revenue) x 100
For example, let's say your company had $1 million in revenue from existing customers at the beginning of the year. Over the course of the year, you lost $100,000 in revenue from churned customers but gained $20,000 in revenue from downgrades. Using the formula above, your Gross Revenue Retention (ARR) would be:
Gross Revenue Retention = (($1MM - $100K - $20K) / $1MM ) x 100 = 88%
In this example, your Gross Revenue Retention is 88%.