How to Calculate Gross Revenue Retention (GRR)

Gross Revenue Retention (GRR) measures the percentage of recurring revenue retained from existing customers over a period, accounting for churn and contraction but excluding any expansion. It answers a fundamental question: Of the revenue you had at the start, how much did you keep?

GRR is a purer measure of retention than Net Revenue Retention because it isolates losses without the offsetting effect of expansion. This makes it the definitive metric for understanding customer retention health.

Basic GRR Formula

GRR = (Starting Revenue - Churn - Contraction) / Starting Revenue × 100%

Or equivalently:

GRR = Ending Revenue from Cohort (excluding expansion) / Starting Revenue × 100%

Maximum GRR is 100% - you cannot retain more than what you started with when excluding expansion.

Step-by-Step Calculation

Step 1: Define the Cohort

Identify customers who were active at the beginning of the measurement period:

• Active, paying customers only
• Exclude new customers acquired during the period
• Exclude free tier and trial customers

Step 2: Calculate Starting Revenue

Sum the recurring revenue from the cohort at period start:

Starting Revenue = Sum of MRR (or ARR) for cohort at period start

Step 3: Calculate Churned Revenue

Revenue lost from customers who cancelled:

Churned Revenue = Sum of recurring revenue from customers who cancelled during period

Step 4: Calculate Contraction Revenue

Revenue reduction from customers who downgraded (but didn't cancel):

Contraction Revenue = Sum of revenue decreases from downgrades

Step 5: Calculate GRR

GRR = (Starting Revenue - Churned Revenue - Contraction Revenue) / Starting Revenue × 100%

Example Calculation

Monthly GRR Example

January cohort (customers active on Jan 1):

• Starting MRR: $100,000

During January:

• Churned MRR: $3,000 (cancellations)
• Contraction MRR: $2,000 (downgrades)
• Expansion MRR: $8,000 (upgrades - excluded from GRR)

GRR = ($100,000 - $3,000 - $2,000) / $100,000 × 100%
GRR = $95,000 / $100,000 × 100%
GRR = 95%

Annual GRR Example

January 1 cohort:

• Starting ARR: $1,200,000

During the year:

• Churned ARR: $84,000 (7% of starting)
• Contraction ARR: $36,000 (3% of starting)
• Expansion ARR: $180,000 (excluded)

GRR = ($1,200,000 - $84,000 - $36,000) / $1,200,000 × 100%
GRR = $1,080,000 / $1,200,000 × 100%
GRR = 90%

GRR vs. NRR Comparison

Metric	Formula	Maximum	What It Shows
GRR	(Start - Churn - Contraction) / Start	100%	Pure retention
NRR	(Start + Expansion - Churn - Contraction) / Start	Unlimited	Net customer value change

Side-by-Side Example

Component	Amount
Starting MRR	$100,000
Churned MRR	$5,000
Contraction MRR	$3,000
Expansion MRR	$15,000

GRR: ($100,000 - $5,000 - $3,000) / $100,000 = 92% NRR: ($100,000 + $15,000 - $5,000 - $3,000) / $100,000 = 107%

The 107% NRR looks healthy, but the 92% GRR reveals 8% leakage that expansion is masking.

GRR Benchmarks

Performance Level	Annual GRR	Monthly GRR
Best-in-Class	95%+	99.5%+
Good	90-95%	99-99.5%
Acceptable	85-90%	98.5-99%
Concerning	80-85%	98-98.5%
Critical	< 80%	< 98%

Benchmarks by Segment

Customer Segment	Typical GRR
Enterprise	95-98%
Mid-Market	90-95%
SMB	80-90%
Consumer/Prosumer	70-85%

Larger customers with higher switching costs typically have better retention.

Common GRR Mistakes

Mistake 1: Including Expansion

GRR explicitly excludes expansion revenue. Including it confuses GRR with NRR.

Mistake 2: Wrong Cohort Definition

New customers acquired during the period should not be in the cohort. They didn't have a full period to be retained.

Mistake 3: Missing Contraction

Some calculations only count churn, ignoring downgrades. This overstates GRR.

Mistake 4: Time Period Confusion

Monthly GRR and annual GRR are not directly comparable. A 98% monthly GRR compounds to roughly 78% annual.

Annual GRR ≈ Monthly GRR ^ 12
0.98 ^ 12 = 0.785 (78.5%)

Mistake 5: Revenue vs. Logo Confusion

GRR uses revenue, not customer count. Dollar-weighted retention differs from logo retention.

Improving GRR

Reduce Churn

Proactive retention:

• Customer health scoring
• At-risk customer identification
• Proactive outreach and intervention

Product improvements:

• Address common pain points
• Competitive feature gaps
• User experience improvements

Customer success:

• Onboarding optimization
• Regular business reviews
• Value realization focus

Reduce Contraction

Prevent downgrades:

• Ensure customers use features they pay for
• Demonstrate value of higher tiers
• Right-size customers at purchase

Pricing strategies:

• Reduce involuntary downgrades (payment failures)
• Offer alternatives to downgrade
• Value-based pricing alignment

GRR in Financial Planning

Revenue Forecasting

Starting with $1M ARR and 90% GRR:

Year 1 retained ARR = $1M × 90% = $900K
Year 2 retained ARR = $900K × 90% = $810K
Year 3 retained ARR = $810K × 90% = $729K

Without new business, the base erodes. GRR determines how much new ARR is needed just to stay flat.

Unit Economics

GRR affects customer lifetime and CLV:

Customer Lifetime ≈ 1 / (1 - Annual GRR)

With 90% GRR: Lifetime ≈ 1 / 0.10 = 10 years With 80% GRR: Lifetime ≈ 1 / 0.20 = 5 years

GRR in Context-Aware Analytics

metric:
  name: Gross Revenue Retention
  description: Revenue retained from existing customers, excluding expansion
  calculation: |
    (cohort_start_mrr - churned_mrr - contraction_mrr) /
    cohort_start_mrr * 100
  cohort_definition: Customers active at period start
  excludes:
    - expansion_revenue
    - new_customers_during_period
  time_period: Trailing 12 months (default), Monthly (operational)
  dimensions: [customer_segment, product, region]
  owner: customer_success
  certified: true

With explicit exclusion of expansion revenue, GRR provides a consistent, trustworthy view of pure retention health across all reporting.