Last updated: 31 October 2026
ARR, MRR and NRR measure recurring revenue at different time scales and from different angles. MRR is monthly, ARR scales it to a year, and NRR shows how much existing customer revenue is retained and expanded.
What is MRR?
MRR (monthly recurring revenue) is the predictable revenue from active subscriptions each month. It is a monthly view of the revenue a business can reasonably expect to repeat. It normally excludes one-off fees. For a subscription business, MRR is often the base figure used for other recurring revenue metrics.
What is ARR and how does it relate to MRR?
ARR (annual recurring revenue) = MRR x 12. One-off fees (setup, consulting) are normally excluded. ARR therefore gives a yearly view of recurring revenue by scaling the monthly figure. For example, MRR of £100,000 gives ARR of £1,200,000. The two metrics are closely linked: ARR is simply MRR viewed across twelve months. Excluding one-off fees keeps both measures focused on recurring, predictable revenue rather than project-based income.
What is NRR and how do you calculate it?
NRR = (Starting MRR + Expansion MRR – Contraction MRR – Churn MRR) / Starting MRR x 100. NRR measures the percentage of recurring revenue kept from existing customers, accounting for upgrades, downgrades, cancellations and expansion. It is a retention and expansion measure, not just a new-sales measure. Using the worked example: starting MRR of £100,000, expansion MRR of £8,000, contraction MRR of £2,000 and churn MRR of £4,000 gives NRR of 102%. This means existing customers, as a group, are generating slightly more recurring revenue than at the start of the period, even after downgrades and cancellations.
What is the difference between NRR and GRR?
GRR counts only downgrades and churn, so it cannot exceed 100%; NRR adds expansion and can exceed 100%. GRR is therefore a stricter measure of how much base revenue is retained. From the example above, GRR = (100,000 – 2,000 – 4,000) / 100,000 = 94%. A business can show 120% NRR with 75% GRR, losing a quarter of base revenue a year while expansion covers it up. This is why NRR and GRR should be read together: NRR can look strong while the underlying base is shrinking. Bessemer notes that gross retention (dollar basis) is typically 85–90% across ARR scales.
What is a good NRR?
Benchmarks differ by source, stage and contract size; treat them as context, not targets. CRV reports top-quartile NRR of 94% at seed stage ($1m–$3m ARR), 99% at Series A ($3m–$15m ARR), with top performers at 110%, and 105% at growth stage ($15m–$30m ARR). Bessemer’s cloud portfolio, from 2010 to the first half of 2021, averaged NRR of 140% (range 105–145%) at $1–10m ARR and 120% at $100m+ ARR. Negative churn means expansion revenue exceeds lost revenue. A high NRR can therefore reflect strong expansion from existing customers, but it does not remove the need to understand churn and contraction. Stage, contract size and source all affect how a benchmark should be interpreted.
| Metric or benchmark | Value |
|---|---|
| ARR from MRR of £100,000 | £1,200,000 |
| Worked NRR example | 102% |
| Worked GRR example | 94% |
| CRV top-quartile NRR, seed ($1m–$3m ARR) | 94% |
| CRV top-quartile NRR, Series A ($3m–$15m ARR) | 99% |
| CRV top performers, Series A | 110% |
| CRV top-quartile NRR, growth ($15m–$30m ARR) | 105% |
| Bessemer average NRR, $1–10m ARR | 140% (range 105–145%) |
| Bessemer average NRR, $100m+ ARR | 120% |
| Bessemer gross retention, dollar basis | 85–90% across ARR scales |
Frequently asked questions
What is the formula for ARR?
ARR = MRR x 12. One-off fees such as setup and consulting are normally excluded, so ARR focuses on recurring revenue.
What is the formula for NRR?
NRR = (Starting MRR + Expansion MRR – Contraction MRR – Churn MRR) / Starting MRR x 100. It measures the percentage of recurring revenue kept from existing customers, including upgrades, downgrades, cancellations and expansion.
Why can NRR exceed 100% but GRR cannot?
NRR includes expansion revenue, which can more than offset contraction and churn. GRR counts only downgrades and churn, so it cannot exceed 100%.
What does negative churn mean?
Negative churn means expansion revenue exceeds lost revenue. It is one reason NRR can rise above 100%.
Should NRR benchmarks be treated as targets?
No. Benchmarks differ by source, stage and contract size, so they should be treated as context rather than targets. Readers should check the relevant source and their own stage before comparing figures.
Sources
Figures and prices were checked on 31 October 2026; check the linked sources before relying on them. This article is general information, not tax, legal or investment advice.
