Retention Rate vs Renewal Rate

Note the difference between Renewal Rate and Retention Rate. The Renewal Rate will always be lower than the Retention Rate because the denominator of the former is smaller than that of the latter. As an example, consider a company with $250,000 of Exposed ARR in a specific quarter and this makes up 25% of its $1,000,000 ARR base. The company renews 80% or $200,000 of this Exposed AR. The retention rate during this quarter is 95% or $950,000 of its $1,000,000 ARR base. The $950,000 numerator is the sum of the Renewed ARR, $200,000, and the ARR that was not up for renewal, $750,000.

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