What Is Gross Renewal Rate (GRR)? (Definition & Formula)

What is the gross renewal rate?

Gross renewal rate is a customer retention metric that marks the percentage of customers who renew their contracts during a specific period. 

Gross renewal rate considers downgrades or contraction MRR, and churned revenue (cancellations), but doesn’t account for expansion revenue (unlike Net Renewal Rate).

Renewal rate is the inverse of churn; if your gross renewal rate is 95%, then your gross churn is 5% (for example).

How to calculate gross renewal rate (formula)

To calculate gross renewal rate, you need to subtract all the downgrades and churn from monthly recurring revenue (MRR) at the start of the month, divide that by MRR at the start of the month, and multiply by 100.

Here's the formula:

Gross Renewal Rate = [(MRR - Churn - Downgrades) / MRR] * 100

Here’s an example of what it looks like:

  • You have 200 customers, all of which pay $50/month — your MRR at the start of the month is $10.000
  • Over the course of a month, three customers decide to cancel their subscription — Churn = 3*$50 = $150
  • During that same month, one customer decides to downgrade to a $40 plan, now paying $10 less — Downgrade = $10
  • Apply the formula: GRR = [($10.000-$150-$10)/$10.000]*100 = 98.4% gross renewal rate

How to improve gross renewal rate

1. Improve customer stickiness (and other retention metrics)

Customer stickiness is in direct correlation with gross renewal rate. The likelier customers are to stick with you, the higher your GRR will be.

You can also look into these retention metrics:

  • Net renewal rate
  • Revenue retention
  • Customer health score

2. Investigate why your customers churn

Some churn is impossible to prevent even if you’re doing everything right.

Working on churn prevention and keeping it down to a minimum is the next best thing — and a realistic strategy. 

Pricing, poor experience, and lack of value are the most common reasons customers switch over to competition. Some common churn management strategies include:

  • Asking customers why they churned
  • Investing in customer education materials
  • Equip your customer success teams with software/tools for identifying at-risk customers
  • Incentivizing annual contracts with discounts
  • Focus customer acquisition on better fit customers

3. Does your product match the customers’ expectations?

“False advertising” may be a strong way to word it, but customers sometimes look for alternatives because you’ve created a wrong impression about your product.

Be clear about what it can and can’t do, what use cases it matches the best, and that keyword intent in your content/ads is precise and truthful.

Quick FAQs about gross renewal rate

1. What’s a good gross renewal rate?

The maximum GRR value is 100% — the closer gross renewal rate gets to 100, the better. 

However, a 100% GRR is impossible to have month after month; you should always expect some customer churn.

A more realistic goal for an enterprise SaaS company is a median GRR of about 90%; SMBs can afford to target a slightly lower GRR, about 80%. The median GRR values to strive for may vary, depending on company size and business model.

2. How is gross renewal rate different from net renewal rate?

Gross renewal rate only accounts for MRR, churn, and downgrades, while net renewal rate focuses on expansions and upgrades.