📓Key Concepts to Learn💡

1. Gross Revenue Retention (GRR) 📈

   - This metric measures the revenue retained from existing customers after accounting for downgrades and churn. 
   - It helps in understanding how well a SaaS company is retaining the revenue from its customer base over time.

2. Net Revenue Retention (NRR) 🔄

   - NRR is similar to GRR, but it also accounts for expansion revenue from existing customers in addition to downgrades and churn.
   - This metric provides insights into the overall revenue growth from existing customers, including both retained and additional revenue.

3. Cohort Method for Retention Analysis 📊

   - This method involves tracking a specific group of customers (cohort) over time to analyze their retention, revenue, and number of customers.
   - It provides a granular view of how a particular set of customers are contributing to the revenue and helps in understanding trends and patterns within the cohort.

4. Aggregate Method for Retention Analysis 📈

   - The aggregate method involves analyzing the overall layers of Monthly Recurring Revenue (MRR), including beginning balance, new MRR, expansion, contraction, and churn.
   - It provides a broader perspective on revenue retention across the entire customer base and is commonly requested during due diligence. They will ask for your MRR schedule!

5. MRR Schedule 🗓️

   - The MRR schedule is a crucial tool for calculating retention metrics, and it outlines the Monthly Recurring Revenue over time, providing the data necessary for retention analysis.
   - The accuracy and completeness of the MRR schedule are essential for generating meaningful insights into customer retention and revenue trends.

These key concepts provide a comprehensive understanding of the metrics and methods used to analyze customer retention and revenue in the SaaS industry. Understanding these concepts is fundamental for SaaS executives, CFOs, and anyone involved in analyzing and improving customer retention strategies.

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If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge on essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,

Ben Murray
Host of SaaS Metric School

📝 Episode Recap 🎧

In this episode of SaaS Metrics School, host Ben delves into the methods for running retention analysis in SaaS companies. Ben highlights the recent Klaviyo S-1 filing and the controversy surrounding their calculation of gross revenue retention, urging listeners to explore previous episodes for a deeper understanding.

Ben explains the two main metrics for retention analysis: gross revenue retention (GRR) and net revenue retention (NRR). GRR focuses on the revenue retained from existing customers after accounting for downgrades and churn, while NRR factors in expansions offset by downgrades and churn.

Moving on, Ben introduces two main methods for running revenue retention analysis. The first is the cohort method, which involves tracking a specific group of customers over time to monitor their ARR and MRR. The aggregate method, on the other hand, is a practical and commonly requested approach that involves examining layers of MRR including expansion, contraction, and churn.

Listeners are reminded of the importance of maintaining an accurate MRR schedule, with Ben emphasizing the significance of using reliable data to produce meaningful retention numbers.

The episode concludes with Ben offering retention templates on his blog, encouraging the audience to utilize them for tracking and improving their retention analysis. He also requests listeners to share their feedback through reviews and ratings.

Tune in to gain insights into the critical methods of retention analysis in SaaS businesses and access templates for enhancing retention tracking.

P.S. Don't forget to subscribe to our podcast and share it with your SaaS business buddies. Together, let's conquer the world of SaaS metrics!

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