Skip to main content
ServiceXRG
  • Your Challenges
    • Overview
    • Self-Assessment
  • Our Solution
    • Overview
    • Achieving Service Success
    • Our Process
    • Service Success Framework
    • Membership
  • Why ServiceXRG
    • Overview
    • Capabilities
    • Clients
    • Team
  • Resources
    • Resource Library
    • Blog
  • Member Login
ServiceXRG
  • Member Login
  • Self-Assessment
  • Let’s Talk
  • Your Challenges
    • Overview
    • Self-Assessment
  • Our Solution
    • Overview
    • Achieving Service Success
    • Our Process
    • Service Success Framework
    • Membership
  • Why ServiceXRG
    • Overview
    • Capabilities
    • Clients
    • Team
  • Resources
    • Resource Library
    • Blog

Blog : How to Measure Net Recurring Revenue

  • Previous Post
  • All Posts
  • Next Post

How to Measure Net Recurring Revenue

By Tom Sweeny October 22, 2020

Here's how tech companies can measure net recurring revenue.

Net Recurring Revenue is a comprehensive indicator that reveals the extent to which you are retaining, expanding, and growing customer relationship value.  Examining the specific underlying elements that contribute to the calculation of Net Recurring Revenue provides necessary insights to identify the root causes of churn, attrition, and contraction.

Net Recurring Revenue Defined

Net Recurring Revenue measures the additions and losses to recurring revenue over a specified period. Net Recurring Revenue Rate indicates if the overall value of customer relationships is expanding or contracting. Knowing how to measure Net Recurring Revenue, you can obtain a clear indication of the performance and impact of service offers, products, programs, and customer-focused policies and practices.

How to Measure Net Recurring Revenue

To calculate the Net Recurring Revenue Rate, you need to know how much recurring revenue is added and lost within a period.  While you can calculate Net Recurring Revenue Rate by knowing the aggregate recurring revenue you add and lose within a period, it is ideal to have as much granularity as possible.

Recurring Revenue Measurement Period

Net Recurring Revenue is a time-based measurement.  Choose a period such as a month, quarter, or year.  The shorter the period the more likely you are to see variations from period to period due to time-based market factors and customer behaviors.  Measurement over longer periods will provide a more accurate reflection of the actual trajectory of recurring revenue performance.

Existing Recurring Revenue

Start with your Existing Recurring Revenue (Existing RR) at the start of a period.  This includes any sources of revenue that are renewable at the end of a term including product and service subscriptions.  This does not include one-time purchases and license fees.

Recurring Revenue Lost

Subtract Recurring Revenue Lost (RR Lost) during that period.  This includes subscriptions that are canceled or non-renewed (lost) and subscriptions that are reduced in total value (contraction).

Recurring Revenue Added

Add Recurring Revenue Added (RR Added).   This will include any new sources of recurring (additions) or expansion of the value of existing recurring revenue relationships.

See the formula below.

The Meaning of Net Recurring Revenue

Measuring Net Recurring Revenue provides a clear indication about the extent to which recurring revenue is growing or declining.  The more important insights from this metric come by examining the reasons for growth or contraction of Recurring Revenue.  Consider the following when examining Net Recurring Revenue:

  • What is the trend in Net Recurring Revenue – growth or contraction?
  • What is the rate of rate of change in growth / contraction?
  • What are the primary reasons for loss of recurring revenue – loss of customers or contraction or exiting of relationships?
  • What are the primary factors that contribute to revenue gains – new relationships or expansion of existing relationships?

The type and magnitude of changes to Net Recurring Revenue Rate can provide important insights into the reasons for changes to the value of customer relationships.  Use these insights to develop strategies to stem customer churn and reduction of contract value. Build upon practices and circumstances that lead to new customer engagement and growth of existing relationships.

Net Recurring Revenue

Using Services to Retain & Grow Recurring Revenue

Well-defined service programs and effective delivery capabilities are the keys to maximizing recurring revenue performance.

In this whitepaper we will:
  • Outline the three key characteristics of technology companies that are steadily and sustainably driving and growing recurring revenue
  • Provide in-depth descriptions and strategic applications of four critical imperatives for revenue retention and expansion
Download Now

Reach your goals faster and take your services farther

Our process determines where you stand today and provides a custom roadmap and coaching to reach your outcomes faster with insights for ongoing success.

Our Process
  • Previous Post
  • All Posts
  • Next Post

Is Your Strategy Built For Growth?

Take the Assessment

Subscribe for even more resources and the latest in your inbox.

"*" indicates required fields

Name*

By clicking the "Submit" button you accept and agree to be bound by the Terms of Use and Privacy Policy.

This field is for validation purposes and should be left unchanged.

Related Posts

  • 3.30.23 Read Time: < 1

    Self-Service Initiatives (Still) Fall Short

    The impact of self-help is often overstated (or worse, not known) and the ability to improve self-help performance is underfunded.

  • 3.29.23 Read Time: < 1

    Upcoming Webinar: Scaling Customer Service in the Era of ChatGPT

    Apr 13, 2023 11:00 AM EDT / 8:00 AM PDT   Search is the way we access knowledge today. It is the foundation for customer self-help and the way service …

  • 3.15.23 Read Time: 2 Mins

    What is the primary expected outcome of your service organization?

    Service teams are shifting their focus to the attainment of strategic outcomes.

ServiceXRG

© Service Excellence Research Group, LLC 2023. All Rights Reserved.

Website by Imagebox

Contact Info
  • Email: info@servicexrg.com
  • Phone: 800-475-0089
Quick Links
  • Your Challenges
    • Overview
    • Self-Assessment (Old)
  • Our Solution
    • Overview
    • Achieving Service Success
    • Our Process
    • Service Success Framework
    • Membership
  • Why ServiceXRG
    • Overview
    • Capabilities
    • Clients
    • Team
  • Resources
  • Let’s Talk
Social Media
  • LinkedIn
  • Newsletter
  • Twitter