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Learn how to calculate net expansion rate accurately, avoid common mistakes, and use this key metric to measure and grow your subscription business revenue.
Many businesses operate on a treadmill, constantly chasing new leads to replace the customers who churn. But what if you could step off and build growth from a more stable foundation? Focusing on your existing customers is the key, and the net expansion rate is how you measure your success. This metric strips away the noise of new acquisitions and shows you exactly how much your current customers are increasing their spend. It’s a pure reflection of their satisfaction and your ability to meet their evolving needs. A healthy rate means you’re not just retaining customers—you’re turning them into advocates who grow alongside you.
If you run a subscription business, you know that keeping customers is just as important as finding new ones. But what if your existing customers could be your biggest source of growth? That’s exactly what the Net Expansion Rate (NER) tells you. In simple terms, NER measures how much your revenue from current customers has grown over a specific period. It focuses purely on the positive momentum—the upgrades, add-ons, and cross-sells that show your customers are getting more value from your product and are willing to pay for it.
An NER over 100% means your existing customer base is generating more revenue than they did in the previous period. It’s a powerful indicator of a healthy business because it shows you’re not just retaining customers; you’re successfully growing with them. For subscription-based businesses, tracking NER is essential for understanding sustainable growth potential. It answers a critical question: Are your customer relationships getting more valuable over time? Think of it as a measure of your ability to deepen relationships. Instead of just preventing customers from leaving, you're actively increasing their value to the business by providing more of what they need. This internal growth engine can be incredibly powerful, often driving profitability more efficiently than new customer acquisition alone. When your NER is strong, it signals that your product is sticky and that you have a solid foundation for long-term, scalable success.
You’ve likely heard of other metrics like Net Revenue Retention (NRR) and Gross Revenue Retention (GRR), and it’s easy to get them mixed up. Let’s clear up the confusion. Think of them as different lenses for viewing customer revenue.
Net Revenue Retention (NRR) is the most comprehensive of the three. It takes your starting revenue, adds expansion revenue from upgrades, and then subtracts revenue lost from both downgrades and customer churn. NRR gives you a holistic view of your customer revenue health.
Gross Revenue Retention (GRR) is a bit stricter. It only looks at the revenue you’ve kept from existing customers, including downgrades but excluding any expansion revenue. GRR can never be over 100% and tells you how good you are at retaining your baseline revenue.
Net Expansion Rate (NER), on the other hand, specifically isolates the growth from your existing customers. It measures how effective you are at increasing customer value through upselling and cross-selling. While related to NRR, NER’s focus is purely on the "expansion" part of the equation, making it the go-to metric for gauging the success of your growth initiatives within your current customer base.
Tracking NER is about more than just adding another number to your dashboard; it’s about gaining a deeper understanding of your business's health and long-term viability. A high NER is a strong signal that your customers are happy. They’re not just sticking around—they’re actively investing more into your products and services, which is one of the clearest signs of satisfaction you can get.
This metric is also a powerful reflection of your company’s efficiency. It’s almost always more cost-effective to generate more revenue from an existing customer than to acquire a new one. A strong NER proves that your upselling and cross-selling strategies are working. It validates your product roadmap and shows that you’re building features and services that your customers truly need. By keeping a close eye on your NER, you can make smarter, data-driven decisions that fuel sustainable growth from the inside out.
Calculating your Net Expansion Rate doesn't have to be complicated. Once you understand the formula and the data you need, you can get a clear picture of how well you're growing revenue from your existing customer base. Let's walk through the steps to get it right.
At its core, the formula for Net Expansion Rate is straightforward. You take the revenue from your existing customers at the end of a period, divide it by the revenue from those same customers at the start of the period, and then multiply by 100 to get a percentage.
NER = (Revenue from Existing Customers at End of Period / Revenue from Same Customers at Start of Period) x 100
Think of it this way: if you started the quarter with $50,000 in monthly recurring revenue (MRR) from a specific group of customers, and by the end of the quarter, that same group was generating $55,000 in MRR, your NER would be 110%. It shows you grew revenue from your current base by 10%.
To get an accurate result, you need to track a few key revenue streams from your existing customers. The calculation includes your starting revenue plus any expansion revenue, minus any contraction or lost revenue.
Expansion revenue comes from upsells (customers upgrading to a more expensive plan) and cross-sells (customers buying additional products or services). Contraction revenue happens when customers downgrade to a cheaper plan. Churn is when a customer leaves entirely. All these factors influence the final revenue figure for your starting customer group. You can find more helpful articles on financial metrics in our HubiFi blog.
A few common slip-ups can throw off your NER calculation. The first is inconsistent timing. If you measure NER monthly one quarter and quarterly the next, you won't be able to spot meaningful trends. Pick a consistent period—monthly, quarterly, or annually—and stick with it.
Another major issue is inaccurate data. If your revenue information is spread across different systems and isn't clean, your calculation will be flawed from the start. Using a system with the right integrations ensures you’re pulling from a single source of truth. Finally, make sure you aren't accidentally including revenue from new customers acquired during the period, as this will artificially inflate your rate.
The golden rule of calculating NER is to focus only on the cohort of customers you had at the beginning of the measurement period. This means you need a clean, well-defined list of who those customers are and how much revenue they generated at the start date.
Any revenue from customers you acquired during the period must be excluded from this calculation. Their revenue belongs in a separate analysis of new business growth. Likewise, you must account for customers from the initial group who left (churned). Their lost revenue is a critical part of the equation. An automated revenue recognition system is designed to handle this kind of dynamic segmentation automatically, saving you time and preventing errors.
So, you’ve calculated your Net Expansion Rate. Now comes the big question: is that number good? The simple answer is that any NER over 100% is a great sign. It means your existing customers are generating more revenue for you over time, which allows your business to grow even without acquiring new customers. Think of it as a powerful engine for sustainable growth, running on the loyalty and satisfaction of the people who already believe in your product. When your NER is above 100%, it means your expansion revenue from upsells and cross-sells is outpacing any revenue lost from customer churn or downgrades.
However, a "good" NER isn't a one-size-fits-all figure. It often depends on your industry, company size, and business maturity. A venture-backed, high-growth SaaS company might aim for 120% or higher, while a more established business in a different sector might be perfectly healthy with a rate closer to 105%. The key is to understand what the number means for your business and to track it consistently. Instead of just chasing a specific number, focus on the story your NER is telling you about customer health and product value. This metric is your guide to understanding if you're building a business that can last.
While your own historical performance is the best benchmark, it’s helpful to know where you stand. Generally, any Net Revenue Retention (a metric closely related to NER) above 100% is considered strong. This indicates that your revenue from upsells, cross-sells, and upgrades is greater than the revenue you're losing from churn and downgrades. For small to mid-sized SaaS businesses, an NER between 90% and 100% can be acceptable, especially if you're actively working on product improvements and refining your customer success strategy. For larger, enterprise-focused companies, the expectation is often higher, with top performers reaching 125% or more. The goal is to see a positive trend, showing that your efforts to retain and grow customer accounts are paying off over time.
Your Net Expansion Rate is more than just a number; it’s a direct reflection of the value your customers get from your product. A high NER is a clear signal that your customers are happy, engaged, and willing to invest more in your solution. It shows that you’ve successfully moved beyond just selling a product to building a lasting partnership. When customers upgrade their plans or add new services, they’re essentially voting with their wallets, confirming that you’re helping them solve their problems and achieve their goals. A positive net expansion rate means you're making more money from your current customers than you're losing. This is a powerful indicator of product-market fit and a strong customer success function. It validates your pricing strategy and proves that your business has a solid foundation for scalable, profitable growth.
On the flip side, an NER below 100% is a red flag that needs your immediate attention. This means you're losing more revenue from existing customers through churn and downgrades than you're gaining from expansion. It’s a sign that something is off. Your customers might not be seeing the value they expected, your pricing could be misaligned, or your competitors might be offering a more compelling solution. A consistently low or declining NER is an early warning system. It tells you that your business has a "leaky bucket" problem—you're losing customers and revenue faster than you can replace them. Before you pour more resources into acquiring new customers, it's critical to investigate why your current ones are leaving or scaling back. This number prompts you to dig deeper into customer feedback, product usage, and support tickets to find and fix the root cause.
Your Net Expansion Rate isn't just another number on a financial dashboard; it’s a direct reflection of your customer relationships and the long-term value of your product. Think of it as a health score for your existing revenue base. It tells a compelling story about how much your customers are growing with you long after the initial sale. A strong NER shows that you’re not just retaining customers, but you’re also successfully deepening those relationships by providing more value over time. This metric is crucial because it isolates growth that comes from the customers you’ve already earned, which is often more profitable and sustainable than constantly chasing new leads.
Several key factors, both within and outside of your control, can cause this metric to rise or fall. Understanding these drivers is the first step to actively improving your NER and building a more resilient business. It’s about looking beyond the surface-level number and digging into the "why" behind it. Is your customer success team creating loyal advocates? Does your pricing model encourage growth? Are your customers fully utilizing your product’s features? By examining these influences, you can move from passively tracking NER to strategically managing it, turning customer satisfaction into predictable revenue growth.
Happy customers are the foundation of a strong Net Expansion Rate. It’s a simple concept: when customers love your product and feel supported, they’re far more likely to stick around, upgrade their plans, and purchase add-ons. A high NER is direct proof that you’re delivering on your promises and that customers are willing to invest more because of it. This is why a well-resourced customer success team is not a cost center but a revenue driver. By proactively helping customers achieve their goals with your product, you’re building the loyalty that fuels expansion and turns satisfied users into your most valuable source of growth.
How customers interact with your product every day directly impacts your NER. Net expansion measures the financial result of these interactions—the revenue you gain when customers upgrade or buy more, and what you lose when they downgrade or leave. Are they adopting new features? Are they approaching usage limits that might trigger an upgrade? Tracking these patterns helps you spot both opportunities and risks. With the right data, you can proactively reach out to a customer who seems stuck or offer a timely upgrade to a power user. Having a clear view of product usage requires connecting data from different systems, something a robust data integration strategy can solve.
Your pricing model is one of the most direct levers you can pull to influence NER. A strategy built for expansion gives customers a clear path to grow with you. Tiered pricing, usage-based models, and optional add-ons all create natural opportunities for customers to increase their spending as their needs evolve. If your NER is consistently above 100%, it’s a strong signal that your pricing aligns with the value you provide. The key is to make it easy and logical for customers to pay you more as they get more out of your service. Your pricing shouldn't be a barrier; it should be a ladder that helps customers scale.
External forces can also shape your Net Expansion Rate. For businesses operating internationally, fluctuations in currency exchange rates can affect revenue from one period to the next. Broader economic trends, like a recession or industry-wide budget cuts, can also lead to increased churn or more downgrades, pushing your NER down. While you can’t control the global economy, you can stay informed and prepare for shifts. Monitoring these conditions allows you to set realistic targets and adjust your customer retention strategies proactively. Understanding the bigger picture helps you interpret your NER with the right context and make smarter financial plans.
Not all customers are created equal when it comes to expansion potential. A large enterprise client likely has a much higher ceiling for growth than a small startup. This is why calculating a single NER for your entire customer base can sometimes hide important details. By breaking down your NER by different customer segments—like company size, industry, or subscription plan—you can uncover valuable insights. You might find that one segment is expanding rapidly while another is churning. This allows you to tailor your customer success and marketing efforts to the unique needs of each group, focusing your resources where they’ll have the greatest impact.
Calculating your Net Expansion Rate shouldn't feel like a frantic scramble for numbers at the end of every quarter. If you’re manually pulling data from spreadsheets and trying to piece everything together, you’re opening the door to errors and wasting valuable time. To track NER effectively, you need a solid foundation of tools and systems that work together. This infrastructure isn't just about convenience; it's about getting a clear, accurate, and real-time picture of your company's growth from its existing customer base. When your systems are streamlined, you can move from simply calculating a metric to actually using it to make smarter decisions. The right setup automates the heavy lifting, so you can focus on the story the data is telling you. It’s about building a reliable process that gives you confidence in your numbers and frees you up to focus on strategy. Without automation, you risk inconsistent calculations, missed opportunities, and a skewed understanding of customer health. An integrated system ensures that every upgrade, downgrade, and cross-sell is captured correctly, giving you trustworthy insights into your revenue streams to guide your growth.
For any subscription-based business, NER is a vital sign of your business's health. It tells you how well you’re retaining and growing revenue from the customers you’ve already won. A dedicated revenue recognition system is essential because it properly categorizes all your revenue streams—new sales, renewals, upsells, and downgrades. Instead of just seeing a single revenue number, these systems give you the detailed components you need to calculate NER accurately. They provide a clear, auditable trail of how revenue from each customer changes over time, which is the core of the NER calculation. This clarity helps you understand not just what your NER is, but why it is what it is.
The accuracy of your NER calculation is completely dependent on the quality of your data. As the saying goes, garbage in, garbage out. To get a reliable number, "you need good, clean customer information for the calculation to be correct." This means having a single source of truth for customer data, including precise start dates, renewal dates, and the exact MRR or ARR for every account. It also requires a system that can handle the complexity of integrating data from your CRM, billing platform, and other tools. When your systems are connected, you can be confident that the revenue figures you’re using reflect all customer activity, from a small add-on to a major plan upgrade.
While the NER formula itself seems simple, the real challenge is applying it consistently. The formula is: NER = (Revenue from existing customers at end of period / Revenue from existing customers at start of period) x 100%. To keep this calculation accurate, you must define your terms and stick to them. Are you measuring monthly, quarterly, or annually? Is a customer who signed up on the last day of the previous period included? An automated system removes the guesswork and potential for human error. It applies the same rules every time, ensuring your NER is calculated consistently period over period. This consistency is what makes the metric a reliable indicator of your business performance.
Your Net Expansion Rate doesn't tell the whole story on its own. It’s most powerful when analyzed alongside other key performance indicators. For instance, it’s closely related to Net Revenue Retention (NRR). While NER focuses only on expansion, NRR gives a full picture because it includes both money lost from churn and downgrades and money gained from expansion. Looking at both helps you understand the balance between customer losses and gains. Similarly, a high NER can provide important context for your Customer Acquisition Cost (CAC). If you know that customers tend to spend more over time, you can justify a higher initial investment to acquire them. This helps connect your retention efforts directly to your growth strategy.
Tracking your Net Expansion Rate is a fantastic step, but it’s not always a straightforward process. Several factors can complicate your calculations and make it harder to see the real story behind your revenue growth. Understanding these common hurdles is the first step toward overcoming them and using NER to make smarter decisions for your business. From customer retention to data integrity, let's look at the main challenges you might face.
It’s no secret that losing customers hurts your bottom line. When it comes to your Net Expansion Rate, customer churn is a direct hit to your growth metric. Every customer who leaves takes their revenue with them, which can significantly lower your NER. Even if your remaining customers are spending more, a high churn rate can mask that positive momentum, making it seem like your growth has stalled. This is why focusing on customer retention isn't just about good service; it's a core strategy for building a healthy, sustainable business model that investors love to see.
The old saying "garbage in, garbage out" is especially true when calculating NER. Your calculation is only as good as the data you feed it. Incorrect or incomplete data can lead to wrong calculations and, even worse, bad business decisions. If you’re pulling information from multiple systems that don’t talk to each other—like your CRM, billing software, and accounting platform—it’s easy for errors to creep in. Ensuring data accuracy is crucial for the calculation to be correct, which is why having a single source of truth for your revenue data is so important.
Sometimes, factors outside your control can influence your NER. For businesses operating internationally, changes in currency exchange rates can affect revenue figures and complicate your calculations. Similarly, if you operate in a highly saturated market, finding opportunities for expansion with existing customers can become more difficult. While you can’t control the global economy, you can be aware of these external pressures and account for them in your analysis. This helps you separate market-driven changes from performance-driven results, giving you a clearer picture of your company’s health.
One of the biggest benefits of tracking NER is that it helps you focus your efforts where they’ll have the most impact. It’s almost always more cost-effective to generate more revenue from existing customers than it is to acquire new ones. The challenge lies in allocating your resources—time, money, and people—effectively to make that happen. Should you invest more in your customer success team? Or should you focus on developing new features for upsell opportunities? A clear understanding of your NER can guide these decisions and help you invest wisely.
Your NER is more than just a number; it’s a reflection of your company's long-term viability. A strong NER shows that your business can grow sustainably without being entirely dependent on acquiring new customers. This is a powerful indicator of a healthy business model and is highly attractive to investors. The challenge is to not just track NER as a historical metric but to use it proactively in your strategic planning. By understanding what drives your NER, you can build a roadmap for future growth that is both ambitious and achievable.
Improving your Net Expansion Rate isn't about a single silver bullet; it's about building a customer-centric engine that drives growth from within your existing base. When you focus on delivering continuous value, expansion revenue follows naturally. The key is to be intentional with your efforts, from onboarding to ongoing support. By implementing a few core strategies, you can create an environment where customers not only stay but also grow with you, directly impacting your bottom line. Here are six practical ways to get started.
Your customers' wins are your wins. That's why a solid customer success program is non-negotiable for healthy NER. This goes beyond reactive support; it’s about proactively ensuring customers achieve their desired outcomes with your product. A great customer success team regularly checks in, understands each customer's goals, and provides guidance to help them get the most value. When customers feel supported and see tangible results, they're far more likely to stick around and explore premium features or additional services. For more ideas on building strong customer relationships, check out the HubiFi blog.
Upselling shouldn't feel like a pushy sales tactic. Instead, it should be a natural next step in your customer's journey. A strategic upsell plan involves identifying the right moments to introduce customers to higher-tier plans or add-on features that solve their evolving needs. Use data to track product usage and identify customers who are hitting the limits of their current plan or using features that suggest they're ready for more. By presenting a relevant upgrade at the perfect time, you’re not just selling—you’re helping them succeed further. This approach turns the upsell into a welcome solution rather than an unwanted pitch.
Your product should never be static. The best way to fuel expansion is to build a product that grows with your customers. Create consistent feedback loops through surveys, user interviews, and support ticket analysis to understand what your customers truly need. Use these insights to inform your product roadmap, developing new features and improving existing ones. When customers see you actively listening and responding to their feedback, it builds immense loyalty. It also creates new opportunities for expansion revenue, as you can introduce premium features that your most engaged customers have already told you they want.
An educated customer is an empowered customer. If users don't understand how to use your product effectively, they'll never experience its full value, making them prime candidates for churn. Invest in comprehensive educational resources like a detailed knowledge base, video tutorials, and regular webinars. The goal is to shorten the time it takes for a new user to have that "aha!" moment. When customers can easily find answers and master your platform, they become more deeply integrated into its ecosystem. This confidence makes them more receptive to adopting new features and upgrading their plans down the line.
Loyalty programs are a fantastic way to reward your best customers and encourage continued engagement. But they can also be a powerful tool for identifying at-risk accounts. By tracking participation and usage data, you can spot customers whose activity is dropping off—a key indicator of potential churn. A well-designed program doesn't just offer discounts; it provides exclusive access, early feature releases, or other perks that reinforce the value of your partnership. It shows you appreciate their business, which can be enough to keep a wavering customer from looking elsewhere and keep them invested in your company’s growth.
Don't wait for a customer to cancel to find out they were unhappy. Predictive analytics allows you to get ahead of churn by identifying at-risk customers before they leave. By analyzing historical data on usage patterns, support interactions, and payment history, you can build a model that flags accounts exhibiting churn-like behaviors. This gives your customer success team a chance to intervene with targeted support or special offers. Having clean, centralized data is crucial for this, which is why a system that provides a single source of truth is so valuable. To see how you can get this level of visibility, you can schedule a demo with our team.
Your Net Expansion Rate is more than just a metric for your dashboard; it’s a powerful tool that can shape your entire business strategy. When you understand the story your NER is telling, you can move from reactive problem-solving to proactive, data-informed decision-making. It gives you a clear, honest look at how much value your customers get from your product over time. By tracking and analyzing this number, you can get a handle on everything from future revenue streams to your day-to-day operational priorities. Let's look at a few practical ways you can put your NER to work.
Think of NER as your financial forecast's secret weapon. Instead of just guessing how much you'll grow next quarter, NER helps you estimate the additional revenue you can expect from the customers you already have. This isn't about landing new logos; it's about the predictable, organic growth happening within your existing customer base. A consistently strong dollar-based net expansion rate shows that your revenue can grow even without acquiring new customers, providing a stable foundation for your financial models. By analyzing this trend, you can make much more accurate predictions about future performance and set realistic growth targets that your team can confidently work toward.
Knowing your NER helps you allocate your resources much more effectively. We all know that acquiring a new customer costs more than keeping an existing one. When your NER is high, it confirms that your current customers are happy and willing to spend more. This means you can confidently plan your budget with less pressure on expensive marketing and sales campaigns for new acquisitions. Instead, you can funnel those resources into areas that directly impact customer satisfaction and expansion, like customer success programs, product development, and support—the very things that keep your NER healthy in the first place.
Your NER is one of the most direct indicators of your company's health. A high or rising rate is a clear sign that your customers are satisfied and see long-term value in what you offer. It’s proof that your product is sticky and that you’re successfully building loyalty. On the flip side, a declining NER can be an early warning that something is amiss. It might point to issues with your product, customer support, or pricing. Regularly monitoring this metric allows you to gauge the overall health of your business and catch potential problems before they lead to significant churn.
NER provides critical feedback that should guide your product and sales strategies. A strong NER suggests your offerings are resonating with your core audience and can highlight specific features or plans that are ripe for upsell opportunities. This data helps you double down on what’s working and identify areas for improvement. For investors and stakeholders, a robust NER is compelling evidence that your business can sustain growth through its existing customer relationships. It demonstrates a strong product-market fit and a scalable business model, which is exactly what they want to see. Having the right data integrations in place makes it easier to connect these insights to your strategic planning.
Calculating your Net Expansion Rate is a great first step, but the real value comes from digging deeper into the numbers. A single NER percentage only tells you part of the story. To make smart, strategic decisions, you need to understand the "why" behind your rate. Is growth coming from a specific type of customer? Are there hidden risks you’re not seeing?
Advanced analysis helps you move beyond the surface-level metric to see the full picture of your customer revenue dynamics. By breaking down your NER, you can pinpoint what’s working, what isn’t, and where your biggest opportunities for growth are. These methods turn a simple number into a powerful tool for forecasting, resource planning, and building a more resilient business. With the right data visibility, you can uncover insights that guide your entire growth strategy.
Looking at your entire customer base at once can sometimes hide important details. That’s where cohort analysis comes in. This approach involves grouping customers who signed up around the same time (for example, all customers from Q1) and tracking their spending over time. By analyzing cohorts, you can see how different groups behave and contribute to your overall NER. You might discover that customers acquired through a specific marketing campaign are more likely to upgrade, or that users who adopt a certain feature expand their accounts faster. This helps you identify patterns and behaviors that aren't obvious when you're looking at everyone together.
A customer health score is a metric you create to predict whether a customer is likely to grow, stay flat, or churn. It often combines data like product usage, support ticket frequency, and survey feedback. Monitoring these scores is crucial because they are a leading indicator of your future NER. A rising average health score suggests your customers are happy and finding value, making them prime candidates for renewals and expansions. A high NER often shows that your customer success team is building strong relationships and ensuring customers are satisfied. This makes health scores an essential tool for proactively managing your revenue growth with the help of seamless data integrations.
It’s easy to get caught up in monthly fluctuations, but a single month’s NER doesn’t tell you much. To get meaningful insights, you need to analyze trends over longer periods, like quarters or years. This helps you see the bigger picture and understand the underlying factors driving your NER. For example, you might notice a seasonal dip every year or see a steady upward trend after launching a new product line. Focusing on these long-term patterns helps you distinguish between temporary noise and significant shifts in customer behavior, allowing you to make more informed strategic plans. You can find more tips for interpreting these trends on the HubiFi blog.
The best way to protect your NER from churn is to spot at-risk customers before they decide to leave. Proactive risk assessment involves using data to identify warning signs, like a drop in product usage or a sudden increase in support issues. By flagging these accounts early, your team can intervene with targeted support or education to get them back on track. This approach allows you to address concerns and improve customer satisfaction before it’s too late. Using data to identify potential issues before they escalate can significantly improve your retention rates, which is fundamental to maintaining a healthy NER. If you're ready to get this level of clarity, you can schedule a demo with our team.
What’s the main difference between Net Expansion Rate (NER) and Net Revenue Retention (NRR)? Think of it this way: NRR gives you the full story of your existing customer revenue, including the good and the bad. It accounts for revenue you gain from upsells but also subtracts revenue you lose from downgrades and cancellations. NER, on the other hand, zooms in on just the good part. It specifically measures how much you’re growing revenue from your current customers, making it the perfect metric to see if your upselling and cross-selling efforts are paying off.
Is it possible for my NER to be over 100%? Absolutely! In fact, an NER over 100% is the goal. It means that the revenue you’re generating from existing customers through upgrades, add-ons, and new purchases is greater than any revenue you lost from that same group. It’s a powerful sign that your customers are finding more value in your product over time and are willing to invest more in your partnership.
My NER is under 100%. What's the first step I should take? A rate below 100% is a signal to investigate what’s happening with your current customers. Before you do anything else, start by looking at your churn and downgrade data to understand why customers are leaving or spending less. This is a good time to talk to your customer success team and even reach out to customers directly for feedback. This number is telling you to focus on retention and customer satisfaction before pouring more resources into acquiring new accounts.
Why is it so important to use an automated system instead of a spreadsheet to track NER? While you can technically use a spreadsheet, it’s risky and inefficient. Spreadsheets are prone to human error, and it’s incredibly difficult to pull clean, consistent data from different sources like your CRM and billing platform. An automated system connects your data, ensuring you have a single source of truth. This gives you an accurate, reliable NER calculation every time, so you can spend less time wrestling with numbers and more time making confident business decisions.
How can I tell if my pricing strategy is helping or hurting my NER? Your pricing strategy should make it easy and logical for customers to grow with you. If your NER is strong, it’s a good sign that your pricing tiers or add-on options align with the value customers receive as their needs evolve. However, if you see customers frequently hitting a wall or churning when their needs change, your pricing might be the problem. A good pricing model creates a smooth path for expansion, rather than a barrier.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.