Formula
Gross renewal rate = Σ min(renewed ARR, prior ARR) ÷ ARR due Net renewal rate = Σ renewed ARR ÷ ARR due Logo renewal rate = contracts renewed ÷ contracts due
Worked example
Illustrative figures. Four annual contracts due for renewal in one quarter.
| Contract | ARR due | ARR renewed |
|---|---|---|
| Contract A | 50,000 | 55,000 |
| Contract B | 30,000 | 24,000 |
| Contract C | 20,000 | – |
| Contract D | 10,000 | 10,000 |
| Total | 110,000 | 89,000 |
Gross renewal rate = 84,000 ÷ 110,000 = 76.4%
Net renewal rate = 89,000 ÷ 110,000 = 80.9%
Logo renewal rate = 3 ÷ 4 = 75.0%
Renewal rate and retention
NRR and GRR measure the customers present at the start of a twelve-month window. Renewal rate isolates the contracts that reached a decision point. For a book of annual contracts it is the most direct measure of the renewal motion, and the one account management is usually measured on.
Timing
Count a contract in the period of its scheduled renewal date. Early renewals belong to the period they were due. For renewal-rate purposes, a renewal still under negotiation is open, not lost. In MRR, a contract that expires without automatic renewal leaves MRR unless a stated grace-period policy applies.
Automatic renewal
Contracts that renew unless cancelled carry a different risk from those requiring a signed renewal. Report the two groups separately.
What Revnewed provides
Revnewed lists contracts with a renewal or end date in the next 90 days, with their ARR, split by auto-renew. Auto-renewing contracts past their end date are flagged as overdue renewals.
It does not calculate a renewal rate. Renewal dates, auto-renew status and cancellation records are held on each contract and export to CSV.
Common misstatements
- Multi-year renewals at total value
- A three-year renewal renews one year of ARR, not three.
- Open negotiations counted as lost renewals
- For the renewal rate, a renewal under negotiation is open until it is signed or declined.
- Renewal rate in place of GRR
- It excludes mid-term contraction and contracts not due in the period.