Gross revenue retention (GRR) is a measure of how much revenue a company retains from its existing customers over a period of time. It is calculated by dividing the total revenue from existing customers in a given period by the total revenue from existing customers in the previous period.
GRR is an important business metric because it measures the effectiveness of a company’s customer retention efforts. A high GRR indicates that a company is doing a good job of keeping its customers, which is essential for long-term profitability.
What can affect GRR? A number of factors, including:
- Quality of the company’s products or services
- Level of customer satisfaction
- Effectiveness of the company’s marketing and sales efforts
- Competition in the industry
How do you improve GRR? You could focus on improving the quality of your products or services, increasing customer satisfaction, and investing in marketing and sales efforts.
You can also build in mechanics to your sales compensation plan that drive GRR like: Rewarding a bonus to your account managers every time they secure a multi-year renewal or renew a customer early; paying a higher commission rate on deals with your ideal customer profile (ICP) fit; or giving a SPIF to your customer success managers who earn the highest NPS scores tied to onboarding.
To calculate GRR, you can use the following formula:
GRR = (Total revenue from existing customers in a given period) / (Total revenue from existing customers in the previous period)
For example, if a company had $100,000 in revenue from existing customers in the current period and $90,000 in revenue from existing customers in the previous period, its GRR would be 1.11. This means that the company retained 111% of its revenue from existing customers in the current period.
A high GRR is generally considered to be a good thing, as it indicates that a company is doing a good job of keeping its customers. However, it is important to note that GRR can vary depending on the industry and the company’s specific circumstances.