For SaaS brands, long-term success requires a balance of retaining customers with winning new ones. Acquiring new clients is always the goal, but it can be expensive, and having contracts you can count on makes financial forecasting easier.
With gross revenue retention (GRR), you can calculate the percentage of revenue you expect to retain over a specific period, excluding new contracts or expansions. Tracking GRR highlights how successful your customer retention efforts are. This metric can also highlight issues with your sales tactics, onboarding process, or even the product that could prevent existing customers from staying.
Luckily, an AI-powered CRM like Rox can track and improve your GRR with helpful insights. Here’s how to calculate and track your GRR rate, alongside ways to improve it and how it compares to other key sales metrics.
What is Gross Revenue Retention?
GRR is a financial metric that indicates the percentage of a company’s recurring revenue that comes from existing customers. Tracking GRR shows you how your churn rate — the rate at which you lose customers — affects your revenue. This metric also helps with accurate financial forecasting.
For SaaS brands, building a consistent customer base is necessary for financial stability while you’re chasing new leads. Even if it’s not the bulk of your revenue, it’s hard to predict future earnings when you can’t retain clients.
Over time, GRR can provide helpful insight into the customer lifecycle, like which stages you usually lose clients and the average contract length. This data can help you time sales and customer success outreach to prevent churn.
How To Calculate Gross Revenue Retention
Use the following gross revenue retention formula to calculate this key metric:
Gross revenue retention % = (Beginning MRR - Churned MRR - Downgraded MRR)/Beginning MRR
This GRR calculation starts with your monthly recurring revenue (MRR), or the amount of money you expect to generate each month from recurring subscriptions or contracts.
From there, subtract the amount of recurring revenue you’ve lost due to churn. If your company has multiple subscription options, you’ll also need to subtract the amount of recurring revenue lost from customers moving to a lower tier. Then, divide that number by your beginning MRR, and you’ll get the percentage of revenue retained from month to month.
Gross Revenue Retention Calculation Example
Let’s break down how this GRR formula works in action.
Say your SaaS brand currently has $100,000 in MRR from subscriptions. During Q2, you lose $30,000 in MRR due to customer churn, and lose $10,000 in MRR from subscription downgrades.
In this case, the GRR calculation would look like this:
(100,000 - 30,000 - 10,000)/100,000 = 60% GRR
This SaaS business is losing a significant percentage of its revenue to churn. Tracking GRR could indicate to customer success, product, or sales managers that it’s worth reassessing the customer experience and making improvements to boost retention rates.
Why Sales Leaders Should Track Their Gross Revenue Retention Rate
Your GRR provides helpful insights into customer behaviors that can improve your sales tactics. Here’s more on how tracking gross revenue retention benefits your sales strategy.
Spot Risk Trends Before They Affect Revenue Goals
By tracking your GRR from month to month, you’ll identify notable areas of risk. This gives you the chance to address problems before it affects the stability of your business.
For example, you might notice that the percentage of revenue you’re losing from subscription downgrades is increasing each month, even though you’re hitting sales and revenue targets. This indicates that premium offerings aren’t meeting customers’ needs. Use this information to improve your product or restructure subscription tiers so they better align with customer expectations.
Improve Customer Lifecycle Strategy
Sometimes, the length of your customer lifecycle doesn’t align with predictions, which means your strategy needs adjusting.
For example, if you’re a B2B platform targeting entrepreneurs and small brands, you might find that customers churn faster than expected as they outgrow your services. In this situation, you might adjust sales strategies to acquire new customers more frequently and account for churn.
Alternatively, you might find that your customer lifecycle is consistently long, but that customers tend to downgrade at a certain point as their needs change.You could provide more personalization and special offers for recurring customers to improve customer loyalty.
Strengthen Forecasting Accuracy
Tracking GRR for several quarters shows patterns in the customer lifecycle and MRR. This data leads to more accurate long-term sales forecasts, and more accurate forecasts lead to better budgeting and investment decisions over time.
What is a Good Gross Revenue Retention Benchmark?
A good GRR SaaS benchmark is usually in the 85-90% range. However, the right benchmark for your organization depends on your business model, industry, and average annual contract value.
For example, if your business has a long sales cycle, you might rely heavily on recurring customers to meet revenue goals. When the customer acquisition process is lengthy, consistently relying on new customers to make up for churn is risky. Aiming for a GRR of over 90% might be the key to financial stability.
With the help of AI, Rox can track GRR and other key SaaS metrics to provide actionable insights for your sales and customer success teams. Rox even tracks GRR on a granular level, breaking down revenue retention across customer segments or sales teams within your company for maximum visibility.
Gross Retention vs. Net Retention: Core Differences
Gross revenue retention is often compared with net revenue retention, or NRR, also called net dollar retention. The NRR definition is much broader than GRR. NRR is the percentage of revenue you retain each month after factoring in both expansion and churn.
When comparing GRR vs. NRR, remember that GRR only factors in your existing revenue, while NRR accounts for new customers and upsells. Here’s the NRR formula to highlight the difference:
Net revenue retention = (Beginning MRR + Expansion MRR - Churn MRR)/Beginning MRR
GRR tends to be more effective for measuring customer satisfaction and loyalty over time. Since growth isn’t factored into the calculation, GRR can help identify issues with onboarding processes or product fit that harm retention and total revenue.
How To Increase Gross Revenue Retention in Your Sales Organization
To increase your GRR, you need strong client relationships that lead to stable revenue streams and reliable contracts. As your company grows, you can also track related metrics, such as annual recurring revenue (ARR) and revenue growth rate, for deeper insights.
By taking a proactive approach, both sales analysts and RevOps teams can prevent churn for better recurring revenue metrics. Try the following revenue retention strategies to boost your GRR and keep clients happy in the process:
Pinpoint at-risk accounts with the help of AI tools like Rox: By processing both quantitative and qualitative engagement data, Rox can create a segment of customers at risk of churn. Then, you can work with the customer to address any problems they might be having, strengthening your relationship.
Automate communications throughout the customer lifecycle: Regularly reaching out to customers shows that you care about their experience while keeping your brand top-of-mind. Rox automates these check-ins so you never fall behind. You can also use Rox to automatically schedule quarterly business reviews and other internal sales activities.
Analyze churn patterns to improve your customer success strategies: Over time, you might notice that customers churn after specific events or at a certain point in their lifecycle. With this data, you can make improvements to onboarding and sales engagement strategies to create a better customer experience.
Equip sales reps with retention-focused strategies and playbooks: A customer’s first interaction with your organization sets the tone. Sales reps should work with long-term retention in mind, rather than just closing deals. With Rox, you can build custom sales playbooks into the CRM so reps have access to retention-focused strategies whenever they need.
Use an integrated CRM for in-house collaboration: Sales reps shouldn’t work in silos. They’ll be more productive and keep customers happier when they can collaborate directly with marketing, customer success, and finance. With a CRM like Rox, everyone gets access to a centralized dashboard for consistent data and seamless communication.
Offer pricing tiers catered to your customers’ needs: Ineffective pricing is one of the primary causes of churn. Even with a great product, retaining customers is difficult if pricing doesn’t reflect product value or if billing options don’t align with client needs. Get feedback from customers on the pricing tiers that work best for them.
Invest in the onboarding process: Onboarding sets the stage for customer retention, and you want customers to have every resource they need to use your product successfully from the beginning. Provide detailed interactive tutorials and demos and self-service support materials that customers can access at any time.
Strengthen Your Revenue Retention Strategy With Rox
Rather than focusing on short-term wins, sales teams need to secure deals that promise long-term financial stability and customer loyalty. Tracking GRR rates gives valuable insights into your customer lifecycle and the reasons why customers churn. GRR also shows you how sales and post-sales efforts are performing, helping you address problems before they affect your financial targets.
Rox gives teams the resources they need to calculate and improve GRR rates, with powerful AI tools that automate key sales tasks to help your sales team reach its full potential. Try Rox today to take your sales strategy to the next level.
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