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Your gross retention, or gross dollar retention, measures the percentage of your revenue that you’re able to maintain from existing customers. It’s an especially important metric for software as a service (SaaS) companies, which rely on recurring revenue.
To determine your monthly gross retention take your monthly recurring revenue (MRR) at the start of the month and subtract the churn and downgrades from the month. Then, divide the result by the MRR. Multiply by 100 if you want the percentage. You can also use your annual recurring revenue (ARR) to find your annual gross retention.
Your gross retention ratio can depend on the product or cohort you’re tracking. However, a low ratio (an annual rate under 80%) could be an indication that you need to focus more resources on retaining customers. There may be an issue with your product-market fit, customer service, or pricing.
You may also want to track your net dollar retention, which includes expansion revenue from add-ons, upselling, and cross-selling.
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