How To Calculate Net Revenue Retention in SAP BusinessByDesign | Arithmix

Calculating net revenue retention is an important metric for any business looking to measure the effectiveness of their customer retention strategies. This metric helps businesses understand how much revenue they are retaining from their existing customers over a given period of time. In this article, we will discuss what net revenue retention is, when it is valuable to calculate it, and how to calculate it.

What Is Net Revenue Retention?

Net revenue retention is a metric that measures the percentage of revenue a business retains from its existing customers over a given period of time. This metric takes into account the revenue lost from customers who churned during the period, as well as the revenue gained from upsells and cross-sells to existing customers. The formula for calculating net revenue retention is:

Net Revenue Retention = (Revenue from Existing Customers at End of Period - Revenue Lost from Churned Customers) / Revenue from Existing Customers at Start of Period x 100%

For example, if a business had $1 million in revenue from existing customers at the start of the year, and $800,000 in revenue from those same customers at the end of the year, but lost $200,000 in revenue from churned customers, the net revenue retention would be:

Net Revenue Retention = ($800,000 - $200,000) / $1,000,000 x 100% = 60%

When Is It Valuable To Calculate Net Revenue Retention?

Calculating net revenue retention is valuable for any business that relies on recurring revenue from its customers. This metric can help businesses understand how effective their customer retention strategies are, and identify areas for improvement. A high net revenue retention rate indicates that a business is retaining a significant amount of revenue from its existing customers, which is a positive sign for the business's long-term growth and profitability.

Net revenue retention is particularly valuable for businesses that operate on a subscription-based model, such as software-as-a-service (SaaS) companies. These businesses rely on recurring revenue from their customers, and a high net revenue retention rate is a strong indicator of customer loyalty and satisfaction.

How to Calculate Net Revenue Retention

To calculate net revenue retention, you will need to gather data on your business's revenue from existing customers over a given period of time. This data should include revenue from upsells and cross-sells to existing customers, as well as revenue lost from churned customers.

Once you have this data, you can use the formula outlined above to calculate your net revenue retention rate. It is important to note that the period of time you choose to measure net revenue retention over will depend on your business's specific needs and goals. Some businesses may choose to measure net revenue retention on a monthly basis, while others may measure it quarterly or annually.

Overall, calculating net revenue retention is a valuable metric for any business looking to measure the effectiveness of their customer retention strategies. By understanding how much revenue is being retained from existing customers, businesses can identify areas for improvement and make data-driven decisions to drive long-term growth and profitability.

How Do You Calculate Net Revenue Retention in SAP BusinessByDesign

SAP BusinessByDesign itself isn’t naturally geared towards letting you calculate complex metrics like Net Revenue Retention. As an alternative, teams typically use products like Arithmix to import data from SAP BusinessByDesign and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like SAP BusinessByDesign, combine it with data from other systems, and create calculations like Net Revenue Retention.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Net Revenue Retention in Arithmix

Calculating metrics like Net Revenue Retention is simple in Arithmix. Once you've created your free account, you’ll be able to import your SAP BusinessByDesign data, and use it to create natural language formulas for metrics like Net Revenue Retention.

Arithmix is designed to give you the power to build any calculations you want on top of your SAP BusinessByDesign data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.