Compare the four metrics
| Metric | Question it answers | Includes new customers? |
|---|---|---|
| MRR | What is the current monthly recurring run-rate? | Yes, once included in the recurring snapshot. |
| ARR | What is the annualized recurring run-rate? | Yes; in this guide, MRR × 12. |
| GRR | How much opening-cohort revenue remains before expansion? | No. |
| NRR | How much opening-cohort revenue remains including expansion? | No. |
MRR and ARR
Monthly recurring revenue (MRR) is recurring subscription revenue normalized to one month under a documented policy. A $12,000 annual recurring subscription contributes $1,000 MRR in a simple normalization example. ARR as an annualized run-rate is MRR × 12. Neither is automatically recognized accounting revenue, cash received, or contracted backlog. Exclude one-time setup fees from recurring measures; document discounts and usage treatment.
The monthly bridge
Ending MRR = opening MRR + new + expansion + reactivation − contraction − churn. Use positive magnitudes for losses in this formula. Some billing tools store losses as negative movements; do not subtract those negatives again. Reconcile the result to the closing snapshot and isolate foreign-exchange effects or corrections rather than labeling them organic growth.
GRR: what you kept before upside
Gross revenue retention = (opening-cohort recurring revenue − cohort contraction − cohort churn) / opening-cohort recurring revenue × 100. Expansion and new customers do not improve GRR. Under a consistent simple cohort convention GRR cannot exceed 100%. It reveals revenue leakage that expansion can hide.
NRR: the same customers after expansion
Net revenue retention = (opening-cohort recurring revenue + cohort expansion − cohort contraction − cohort churn) / opening-cohort recurring revenue × 100 for the simple example here. NRR can exceed 100%. Exclude new customers. Use an explicit opening cohort and consistent beginning/ending snapshots. Some platforms use movement-based retention including reactivation; document that convention and never compare differently defined reports as if identical.
Handle reactivation deliberately
In this guide, a previously inactive customer returning during the month is not in the active opening cohort. Its $3,000 reactivation belongs in the company MRR bridge, but not this opening-cohort NRR. If an opening-cohort customer cancels and returns within the same window, reconcile its ending revenue and net movements consistently. Do not count the cancellation while omitting the return.
A worked example
Opening MRR $100,000. New MRR $20,000. Opening-cohort expansion $12,000. Reactivation outside the opening cohort $3,000. Opening-cohort contraction $4,000. Opening-cohort churn $6,000. Ending MRR is $125,000. Net new MRR is $25,000 and growth is 25%. Opening-cohort ending MRR is $102,000, so NRR is 102%. GRR is 90%. Ending annualized run-rate is $1,500,000. These are illustrative figures.
Why both retention measures matter
The example grows overall and retains more than 100% net revenue from the opening group, yet loses 10% of the opening revenue before expansion. Expansion is useful, but the $4,000 contraction and $6,000 churn still deserve investigation. New sales do not fix the meaning of GRR or NRR.
Keep the categories distinct
MRR is a run-rate; bookings are agreed commercial value under a defined convention; contracted revenue is governed by signed terms; recognized revenue follows the business accounting policy; pipeline is potential future business; and a forecast depends on assumptions. Do not add pipeline or unsigned opportunities into MRR.
Rules for a trustworthy dashboard
Fix the period, currency, timezone, customer identity, opening cohort, and subscription normalization policy. Show each movement, GRR, NRR, customer churn, and supporting cohort detail. Show N/A when a denominator is zero. Never silently replace unknown data with zero. Compare sources using reconciliations rather than forcing mismatched totals.
How marketing can contribute to ARR and NRR
Acquisition marketing can contribute to new recurring revenue by attracting suitable customers and helping sales convert qualified demand. Lifecycle education, onboarding, and useful adoption campaigns can support retention and expansion among existing customers. Those existing-customer movements belong in a cohort view; newly acquired customers do not belong in opening-cohort NRR. Marketing works alongside product, sales, customer success, pricing, and service delivery, so a rising metric alone does not prove which team caused the change.
A practical marketing measurement plan
Choose one intervention and one customer cohort. For example, test an onboarding education sequence against the current experience, tracking first-value completion and later retention over a defined window. Record the number of eligible customers, exposure, upgrades, contraction, churn, and the observation period. Where feasible use a randomized holdout; otherwise label a before-and-after comparison as directional because customer mix and other changes may explain the result. Report campaign-attributed revenue separately from evidence of incremental lift. Do not count email opens as recurring revenue.
Try the growth scenario planner →