What is expansion revenue and Net Revenue Retention?

Expansion Revenue — this is additional income received from existing clients by increasing product usage or purchasing additional features and services. For example, if a client increases the number of users or subscribes to a more expensive plan, this is considered expansion revenue.

Net Revenue Retention (NRR) — this metric shows how much revenue from the existing customer base has grown or decreased over a certain period, taking into account expansion, contraction, and churn.

NRR formula:

NRR = (Starting revenue + Expansion Revenue - Contraction Revenue - Churned Revenue) / Starting revenue * 100%

If NRR is greater than 100%, it means revenue from existing clients has increased, indicating healthy business growth without acquiring new clients. If less than 100%, revenue has decreased.

Example:

• Starting revenue: $100,000
• Expansion revenue: $20,000
• Contraction revenue: $5,000
• Churned revenue: $10,000

NRR = (100,000 + 20,000 - 5,000 - 10,000) / 100,000 * 100% = 105%

This means that despite losses, revenue has grown by 5%.