Key Takeaways

• Renewal rate divides renewals by the accounts or dollars whose contracts expired in the period, not by the whole customer base.

• Logo, gross dollar, and net dollar renewal rates measure one cohort three ways: a 10-contract, $430K cohort returns 80.0%, 83.7%, and 91.6%.

• In the worked table, a monthly-billed book makes every customer eligible every month, so its renewal rate is 1 minus its churn rate.

• An annual-contract book has one renewal event per customer per year, so early-stage renewal rates bounce around from quarter to quarter.

How do logo, gross dollar, and net dollar renewal rates differ?

They share one denominator, the contracts that expired in the period, and differ in what they count in the numerator. Gross renewal is dollars renewed over dollars eligible, and net renewal is renewed plus expanded dollars over the same base.

The cohort below holds ten annual contracts that expired in one quarter, with $430K of prior ARR.

• Logo renewal rate: 8 renewed of 10 due = 80.0%.

• Gross dollar renewal rate: renewed dollars capped at prior value ($360K) over $430K = 83.7%.

• Net dollar renewal rate: $394K over $430K = 91.6%, because $34K of upsell offsets $15K of downsell and $55K of churn.

Within one cohort, logo renewal and logo churn add up to 100%. Net renewal counts the upsell that expansion MRR tracks and the downsell that contraction MRR tracks.

Why do annual and monthly contracts give different renewal rates?

The same loss rate produces different renewal rates because the denominator changes with contract length. In the table below, a monthly book makes every customer eligible every month, and an annual book with renewals spread evenly makes about one-twelfth of its customers eligible in a given month.

Both books lost two customers, but the annual book's losses landed on only ten eligible renewals. Churn rate reads 1.7% for both, so in this example it doesn't tell the two books apart.

When you set the measurement period equal to the contract length, the non-renewal rate equals the churn rate. In the monthly column that holds each month, since 98.3% renewal and 1.7% churn sum to 100%. Compounding 98.3% monthly across twelve months gives 81.7%, so quote the window next to the number.

What breaks a renewal rate calculation?

Common errors include a wrong denominator and an unclear definition of "renewed":

• Counting by signup date. Grouping contracts by start date measures retention, a trend over time. Renewal rate groups by contract end date.

• Letting new customers into the base. A customer signed this month wasn't eligible to renew, so they belong in neither column.

• Undefined "renewed". Fix one trigger, such as invoice date, payment receipt, or signature, and apply it to every cohort.

Related terms

Renewal rate answers a narrower question than its neighbors, and the cohorts it leaves out live on these pages.

• Churn rate measures what a business lost over a period, not just among the contracts that came due.

• Gross revenue retention is the all-revenue, expansion-excluded counterpart over a full year.

• Net revenue retention adds expansion across the whole base, where net renewal rate adds it only for expiring contracts.

• Revenue churn weights every loss by its dollars across the whole book.

• Contracted ARR sets the dollar base that renewal cohorts come from.

• Negative churn describes the condition a net renewal rate above 100% points toward.

FAQ

Is renewal rate the same as retention rate?

No, they define the cohort differently. Renewal rate groups customers by the end date of their contract and asks who said yes at that point. Retention rate groups customers by signup date and follows them over time. The first is a snapshot and the second is a trend.

Can renewal rate be above 100%?

Only the net version can. Logo and gross dollar renewal rates top out at 100%, since neither counts more than what was eligible. Net dollar renewal rate adds upsell from the renewing contracts, so $394K renewed against $430K eligible is 91.6%, and enough expansion pushes it past 100%.

What is the difference between renewal rate and churn rate?

Renewal rate uses only the contracts that came due, while churn describes the customers or dollars a business lost during a period. The non-renewal rate equals the churn rate when the period equals the contract length, and renewal rate is one minus the non-renewal rate. They diverge on annual contracts, as in the table above, where churn reads 1.7% and renewal reads 80.0%.