{"id":251741,"date":"2020-10-22T00:00:00","date_gmt":"2020-10-22T04:00:00","guid":{"rendered":"https:\/\/www.servicexrg.com\/blog\/measure-net-recurring-revenue\/"},"modified":"2022-06-14T14:29:57","modified_gmt":"2022-06-14T18:29:57","slug":"measure-net-recurring-revenue","status":"publish","type":"post","link":"https:\/\/www.servicexrg.com\/blog\/measure-net-recurring-revenue\/","title":{"rendered":"How to Measure Net Recurring Revenue"},"content":{"rendered":"
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Net Recurring Revenue is a comprehensive indicator that reveals the extent to which you are retaining, expanding, and growing customer relationship value.\u00a0 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.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Net Recurring Revenue Defined<\/h2>\n

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.<\/p>\n

How to Measure Net Recurring Revenue<\/h2>\n

To calculate the Net Recurring Revenue Rate, you need to know how much recurring revenue is added and lost within a period.\u00a0 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.<\/p>\n

Recurring Revenue Measurement Period<\/h3>\n

Net Recurring Revenue is a time-based measurement.\u00a0 Choose a period such as a month, quarter, or year.\u00a0 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.\u00a0 Measurement over longer periods will provide a more accurate reflection of the actual trajectory of recurring revenue performance.<\/p>\n

Existing Recurring Revenue<\/h3>\n

Start with your Existing Recurring Revenue (Existing RR) at the start of a period.\u00a0 This includes any sources of revenue that are renewable at the end of a term including product and service subscriptions.\u00a0 This does not include one-time purchases and license fees.<\/p>\n

Recurring Revenue Lost<\/h3>\n

Subtract Recurring Revenue Lost (RR Lost) during that period.\u00a0 This includes subscriptions that are canceled or non-renewed (lost) and subscriptions that are reduced in total value (contraction).<\/p>\n

Recurring Revenue Added<\/h3>\n

Add Recurring Revenue Added (RR Added). \u00a0\u00a0This will include any new sources of recurring (additions) or expansion of the value of existing recurring revenue relationships.<\/p>\n

See the formula below.<\/p>\n<\/div>\n<\/div>\n

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The Meaning of Net Recurring Revenue<\/h2>\n

Measuring Net Recurring Revenue provides a clear indication about the extent to which recurring revenue is growing or declining.\u00a0 The more important insights from this metric come by examining the reasons for growth or contraction of Recurring Revenue.\u00a0 Consider the following when examining Net Recurring Revenue:<\/p>\n

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  • What is the trend in Net Recurring Revenue \u2013 growth or contraction?<\/li>\n
  • What is the rate of rate of change in growth \/ contraction?<\/li>\n
  • What are the primary reasons for loss of recurring revenue \u2013 loss of customers or contraction or exiting of relationships?<\/li>\n
  • What are the primary factors that contribute to revenue gains \u2013 new relationships or expansion of existing relationships?<\/li>\n<\/ul>\n

    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.\u00a0 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.<\/p>\n<\/div>\n<\/div>\n

    \"Net<\/span><\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    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 …<\/p>\n","protected":false},"author":4,"featured_media":251742,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_wp_rev_ctl_limit":""},"categories":[27,35,8],"tags":[127,78,79,60,32,33,81,61,40,41,48,49],"acf":[],"_links":{"self":[{"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/posts\/251741"}],"collection":[{"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/comments?post=251741"}],"version-history":[{"count":4,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/posts\/251741\/revisions"}],"predecessor-version":[{"id":252968,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/posts\/251741\/revisions\/252968"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/media\/251742"}],"wp:attachment":[{"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/media?parent=251741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/categories?post=251741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.servicexrg.com\/wp-json\/wp\/v2\/tags?post=251741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}