What is renewal rate?
Renewal rate is the share of customers up for renewal in a period who actually renew. It is a direct read on whether customers find enough ongoing value to keep paying.
It is usually counted by logo, one customer one vote. That makes it simple, but it hides the revenue picture, since losing one large account counts the same as losing one small one.
The renewal rate formula.
Renewal rate = (customers renewed divided by customers up for renewal) times 100. Count only the customers whose contracts came up in the period, not your whole base.
Decide logo-based or revenue-based and stay consistent. A revenue-weighted version tells you more when account sizes vary a lot.
A worked example.
Of 100 customers up for renewal this quarter, 88 renew. The renewal rate is 88 divided by 100, times 100, which is 88%.
What is a good renewal rate?
For SaaS, 90% and above is strong logo retention, and 80 to 90% is solid for many businesses. Below 80% starts to eat into growth. The right benchmark depends on your segment: SMB churns faster than enterprise, so judge each book of business on its own.
Renewal rate is the logo view of retention. For the revenue side, including expansion, pair it with net revenue retention.
How to improve your renewal rate.
Make sure customers reach value early, catch at-risk accounts before the renewal date, and tie the product to outcomes the customer can see. Renewals are won across the whole term, not in the final month.
Retention starts with fit. See how we bring in customers who stay.