“Are we winning enough renewals?”
It’s a simple enough question on the surface, but there are so many different angles from which to look at your renewal numbers.
Should you measure renewals by ARR? Logos? Gross revenue? Should you factor in upsells?
Whether you’re a founder, Sales leader, or running Customer Success, understanding the different types of renewal rates helps you understand your customers, your product, growth opportunities, and potential risks.
And as you move beyond the seed stage through series A, B, and C—your customer base will grow rapidly, and your product will start to outpace the needs of your early adopters, which only increases the risk of churn and the importance of understanding why customers renew or not.
Keep reading this post to understand how to calculate the different types of renewal rates, benchmark your own numbers, and how to improve your renewal rates.
What is renewal rate?
The renewal rate is the percentage of renewed revenue or contracts out of the total revenue or contracts up for renewal during a specific period.
Renewal rate can be calculated in terms of gross revenue, net revenue, monthly revenue, logos, and more.
For example, if 85 out of 100 annual contracts renew, your logo renewal rate is 85%, signaling that most customers choose to extend their contracts.
High renewal rates hinge on a mix of factors:
- strong product-market fit
- selling to the right ICP
- a strong onboarding program
- close relationships with your customers
On an episode of Grow & Tell, Pete Kazanjy, author of Founding Sales, said, “Win rate tells you whether customers care. Average selling price shows how much they care. Renewal rate tells you if you delivered.”
Renewal rate vs. customer retention rate
Renewals and retention are related, but the difference lies in the customer behavior.
- Renewal rate measures the percentage of customers who proactively re-sign at the end of a given subscription period (i.e., their contract is up, and they choose to renew).
- Retention rate tracks how many customers didn’t cancel their plan. Retention rate takes into account all accounts, not only those whose contracts end.
High renewal rates indicate that customers are finding value in your services, while high retention rates point to ongoing satisfaction.
Together, these metrics give you a full view of customer success, and can help identify areas that need improvement.
Renewal rate calculations: 4 key SaaS renewal formulas
In this section, we’ll talk about gross renewal rate, net renewal rate, logo renewal rate, and monthly recurring revenue renewal rate.
1. Gross renewal rate (GRR)
Gross renewal rate measures the percentage of total revenue that you successfully renewed, excluding upsells and expansions.
GRR formula
Gross Renewal Rate = Renewed Revenue / Total Revenue Eligible for Renewal x 100
GRR example
Suppose your SaaS had $500,000 in revenue eligible for renewal at the beginning of the period. By the end of the period, $400,000 of that revenue was successfully renewed.
Step-by-step GRR calculation
- Identify the total revenue eligible for renewal: $500,000
- Calculate the renewed revenue: $400,000
- Apply the formula
Gross Renewal Rate = $400,000 / $500,000 x 100 = 80%
An 80% GRR means that your company retained 80% of the total amount that was up for renewal. It shows the health of your SaaS customer base (without taking into equation upsells or expansions.)
2. Net renewal rate (NRR)
Net renewal rate reflects the percentage of total revenue retained, including renewals and any additional revenue from upsells or expansions.
NRR formula
Net Renewal Rate = Renewed Revenue + Expansion Revenue / Total Revenue Eligible for Renewal
NRR example
Imagine you renewed $850,000 worth of contracts and upsold an additional $150,000 in expansions. Your total revenue eligible for renewal was $1 million.
Step-by-step calculation
- Identify total revenue eligible for renewal: $1,000,000
- Calculate revenue from renewed contracts, and expansions: $850,000 + $150,000 = $1,000,000
- Apply the formula
Net Renewal Rate = $850,000 + $150,000 / $1,000,000100 = 100%
A 100% NRR means you retained all of your existing revenue and achieved growth through expansions. This metric is key for understanding the combined impact of renewals, and upsells on your revenue base.
3. Logo renewal rate
Logo renewal rate indicates the percentage of customers (accounts) who renew their contracts.
Logo renewal rate formula
Logo Renewal Rate = Number of Renewed Customers / Total Number of Customers Eligible for Renewal x 100
Logo renewal example
Your company had 200 customers (logos) eligible for contract renewal this year. Of those, 125 happy customers renewed their contracts.
Step-by-step calculation:
- Identify the total number of customers eligible for renewal: 200
- Count the number of customers who renewed: 125
- Apply the formula
Logo Renewal Rate = 125 / 200 x 100 = 62.5%
While 62.5% shows that more than half of your customers are satisfied to continue their relationship with your company, it also suggests that 37.5% didn’t renew. This could concern you and signal to investigate potential reasons behind the churn.
4. MRR renewal rate
The monthly recurring revenue (MRR) renewal rate indicates if a SaaS company’s monthly income is steady. It's the percentage of MRR kept through renewals over time.
This metric pairs with the renewal rate of annual recurring revenue (ARR), but gives a shorter-term view.
For your Saas, this metric can be more important than logo renewal as it shows contract value over the number of accounts.
MRR renewal rate formula
MRR Renewal Rate = Renewed MRR / Total MRR Eligible for Renewal x 100
MRR renewal rate example
Suppose your company had $400,000 in MRR eligible for renewal at the beginning of the month. By the end of the month, the MRR amount of $350,000 was successfully renewed.
Step-by-step calculation
- Identify the total MRR eligible for renewal: $400,000
- Calculate the renewed MRR: $350,000
- Apply the formula
MRR Renewal Rate = $350,000 / $400,000100 = 87.5%
An 87.5% MRR renewal rate means your company kept 87.5% of recurring revenue up for renewal.
Other ways to measure renewals
In addition to renewal rates, you should also track upsells, customer churn, and customer lifetime value.
5. Upsell rate
Upsell rate in SaaS measures how successfully you’re expanding existing customer accounts by selling them additional products, add-ons, features, or upgrades.
A high upsell rate shows that customers are expanding their use of your products. This reflects your team's deep understanding of the product and its ability to seize opportunities to strengthen existing relationships, offering customers more ways to benefit from the product.
Marie Gassée, Former Director of Online Sales at Box, has a great take on how to upsell existing SaaS clients with in-product previews:
6. Customer churn rate
Churn rate is the percentage of customers who leave or cancel their subscriptions within a set time period.
To uncover the cause of churn, you can do quantitative and qualitative churn analysis. Sometimes a small extra effort can save accounts that were at risk.
Tools like health scores, survey insights, product usage data, and regular customer interactions can help you keep churn rates at bay.
7. Customer lifetime value (CLV or CLTV)
Customer lifetime value (CLV/CLTV) estimates the total revenue a business can expect from a single customer account throughout the relationship's duration.
For example, if your customer spends $500 monthly in 24 months, their CLV is $12,000. Figuring out CLV can be tricky, especially with a mix of customers. It’s usually easier to break it down by segment to keep things simple.
CLV offers great insights for the Customer Success teams. High CLV usually correlates with high renewal rates. By focusing on increasing CLV, you contribute to more strategic renewal efforts, and that positively impacts your bottom line.
SaaS renewal rate benchmarks: what is a good renewal rate?
There's no single industry-standard renewal rate benchmark, but most research shows 80-90% is a high renewal rate. Anything below 50% signals a low renewal rate.
Renewal rates vary by product, customer type, deal size, pricing, and even economic conditions.
Therefore, your best benchmarks will be your own indicators and historical data, tracked consistently in a spreadsheet from quarter to quarter.
As you’ve noticed by now, there are lots of potential renewal rates to measure to tell you the story of your SaaS’s health from a different angle.
For example:
- Say you renew 90 out of 100 enterprise customers, giving you a strong Logo Renewal Rate of 90%.
- However, if your Gross Renewal Rate (GRR) is only 75% (for example, revenue reduced from $10 to $7.5 million), it means that while most customers stayed, they downgraded their contracts, resulting in lower overall revenue.
- This shows you’re retaining customers but missing opportunities to maintain or grow their value through upsells or expansions.
So, instead of just relying on industry averages, take a closer look at your own data and compare different renewal rates. It’ll give you a much clearer picture.
3 ways to improve customer renewal rates
Here, you’ll get practical ideas on how to make your renewal rates higher.
1. Narrowly target your ideal customer profile (ICP)
Focusing sales efforts on your ideal customer profile (ICP) may seem far from the renewal process, but it’s the strategic first move.
Selling to your ICP means putting your product in front of people who truly need its functionalities, increasing renewal probabilities.
Winning the renewal beyond the sale depends on doing great discovery, collecting and documenting that information, and staying aligned with your customers.
By using Dock’s digital sales rooms, you can easily collaborate with buyers, sharing the right content and resources to strengthen the relationship early on.
You can start from a template and then adjust each workspace to fit each prospect and share various documents—proposals, demo videos, and more.
2. Make onboarding a delightful experience
Onboarding is best your shot at making a lasting impression and setting the tone for a strong customer relationship. This is especially true for enterprise customer onboarding.
The old way of onboarding involved using a color-coded spreadsheet to manage tasks for each new customer. While functional, it doesn't offer a top-tier customer experience.
On the other hand, full-fledged project management tools bring better organization but are too cumbersome for interacting with clients directly. This setup requires customers to learn these tools just to work with you, which can feel awkward.
A better way to run onboarding is to centralize all the actions in a tool that doesn’t require a login—a personalized customer onboarding hub where you can share project plans, onboarding materials, and intake forms within a unified and collaborative space.
A centralized workspace gives you two levers: alignment with your customer and an easy sales-to-CS handoff. As a result, your customers are more informed, which gives them a higher chance of renewal.
And this is exactly how Loom uses Dock. Loom’s onboarding team uses Dock to improve customer onboarding with personalized workspaces, embedding content, and tracking progress—all while saving 2 hours per customer.
Brittany Soinski, Manager of Onboarding at Loom explains the details on how they do high-touch onboarding in Loom with Dock.
3. Use Customer Success to drive renewals and customer loyalty
Getting your CS team involved in renewals is key. First, take a look at your engagement model—some customers might not get regular check-ins, but they still need a hand when it’s time to renew.
Joseph Schmitt, VP of CS at UpKeep has a great process in place:
To keep each account organized, you can use Dock’s client portal where you can embed anything—project plans, files, surveys, order forms, etc.
For example, closer to renewal time, you can run a survey with your customer to check how happy they are at that moment. This can help you assess whether this account is likely to renew the contract.
Or you can centralize detailed feedback in the portal so your questions around whether they feel (or not feel) like renewing.
Another cool thing is to track customer engagement through embedded analytics. By seeing who engages with your content and how, you can spot customers that need a bit more attention to increase renewal chances.
Improve your renewal rates with Dock
Every step in the buyers’ journey matters—from razor focus on ICP targeting, thorough onboarding, ongoing support, regular business reviews, and finally, the renewal discussion.
Reliance on spreadsheet, project management and email toolbox approach can make renewals messy and stressful for everyone.
Dock simplifies the path from initial prospect interactions to renewals, fostering collaboration across teams and making customer renewals, and closing deals straightforward.
Give Dock a try—it’s free up to 5 customer workspaces—which already gives you loads of testing opportunities and likely, chances for increased renewals!
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