Renewal Rate
Renewal rate measures the share of contracts or recurring value renewed among those due to renew.
Renewal rate measures the outcome of contracts whose renewal dates fall in a specified window. It can be account-based or value-based, so reports should identify whether they count renewed customers or the recurring value renewed.
Example
Fifty annual contracts are due for renewal this quarter and 43 renew. Logo renewal rate is 86%. If the seven lost contracts are unusually large, the revenue renewal rate can be much lower than 86%.
How to use it
Use the metric to plan renewal work and understand upcoming revenue exposure. For the example company, examine contract value and reasons for nonrenewal. Reporting both logo renewal and gross dollar renewal shows whether the team retains many small accounts while losing larger commitments.
The denominator is the renewal-eligible population, not every customer in the company. Decide how to handle late renewals, early signatures, reductions, and expansion. A quarterly renewal rate is not directly comparable with annual retention across the entire opening customer base.
Further reading: ChartMogul on Renewal Rate.
Related: Customer retention rate, Gross revenue retention.