      kellblog.com · 2022-10-05
      · 1338d
    

Net Revenue Retention: Cohort-Based Measurement vs. Lazy NRR

This article critiques the common practice of calculating Net Revenue Retention (NRR) using ARR bridge shortcuts, arguing that true NRR must be snapshot- and cohort-based. The author distinguishes between 'lazy NRR' (a misleading quarterly metric) and proper cohort-based NRR, explaining why proper methodology matters for accurate SaaS metrics and business health assessment.

5 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

CAC Ratio on net new ARR basis

2.1ratio

example from article

Same company as above, showing CAC deterioration when churn is factored in

CAC Ratio on new ARR basis

1.0ratio

example from article

Healthy benchmark when measured on new ARR basis

Expansion as a percent of new ARR

30%%

benchmark for established growth-phase startups

Optimal level; below 10% suggests missed expansion opportunity, above 50% suggests sales focus problem

NRR

112%%

example from article

Growth-phase SaaS company, considered acceptable but not exceptional

Quarterly churn rate (annualized)

32%%

example threshold

At 8% quarterly (32% annualized), considered problematic