How it’s calculated
Monthly retention = 1 − monthly churn. Average customer lifetime = 1 ÷ monthly churn (in months). Annualized retention = (1 − churn)^12 — the share of a cohort still with you after a year. Net revenue retention (NRR) adds expansion: (1 − revenue churn + expansion) compounded over 12 months, showing whether your existing base grows or shrinks on its own.
monthly retention = 1 − customer churn avg lifetime (months) = 1 ÷ customer churn annual retention = (1 − customer churn)¹² NRR = (1 − revenue churn + expansion)¹²
Worked example
A SaaS with 3% monthly customer churn, 3% monthly revenue churn, and 4% monthly expansion revenue.
- Monthly retention: 97%
- Average customer lifetime: ~33 months
- Annualized customer retention: ~69%
- NRR: ~113% — the base grows even with the leak
What’s a good number?
For SMB-focused SaaS, 3–5% monthly churn is typical; under 2% is strong. Enterprise SaaS should be under 1% monthly. NRR above 100% means expansion outruns churn — the trait investors prize most.