The Biggest Challenges to Achieving World-Class NRR in SaaS

Discover the key obstacles preventing early-stage SaaS companies from achieving world-class Net Revenue Retention (NRR) and actionable strategies to overcome them.

Joseph Loria

12/14/20244 min read

Chalkboard listing four different challenges in net revenue retention.

Net Revenue Retention (NRR) is the ultimate measure of a SaaS company’s ability to grow sustainably.

It shows how well you retain and expand customer relationships—and it’s one of the best predictors of long-term success. For early-stage SaaS companies, achieving world-class NRR (110% or higher) can feel out of reach.

But the barriers to NRR growth aren’t mysteries. From onboarding missteps to weak expansion strategies, these challenges are well-defined and solvable.

In this article, we’ll break down the biggest obstacles standing in the way of stellar NRR and provide actionable steps to help your SaaS business overcome them.

Why NRR is the Ultimate Growth Metric for SaaS Companies

Net Revenue Retention (NRR) measures how much recurring revenue you retain and grow from your existing customers over a specific period. It’s a simple calculation with massive implications for your SaaS company’s health:

NRR = (Starting Revenue + Expansion Revenue - Churned Revenue) ÷ Starting Revenue

Here’s why it’s the growth metric that matters most:

Retention and Expansion Drive Predictable Growth: Unlike new sales, which can be unpredictable, strong NRR shows that your existing customers continue to find value in your product—and are willing to invest more.
World-Class Benchmarks Indicate Scalability: For SaaS companies, an NRR above 110% signals not just retention but active growth. It means your customers aren’t just staying—they’re expanding their relationship with your business.
It Directly Boosts Enterprise Valuation: Investors pay close attention to NRR. A strong NRR demonstrates customer stickiness and growth potential, making your company more attractive during fundraising. High NRR often correlates with higher multiples and better valuations. See the impact on EV with our NRR Calculator.
It Aligns with Long-Term Sustainability: A high NRR reduces reliance on acquiring new customers to maintain revenue. This frees you to focus on improving product value and customer satisfaction instead of just filling a leaky bucket.

When NRR becomes your North Star, it clarifies what’s working and where you need to improve.

The question is: what’s getting in the way of hitting those world-class levels?

Biggest Obstacles to World-Class NRR

Achieving world-class NRR isn’t easy, especially for early-stage SaaS companies. Even with a great product, specific challenges can hold you back. Here are the major roadblocks:

1. Weak Onboarding Experiences

Slow Time to Value (TTV): When customers don’t see results quickly, they disengage.
Unstructured Processes: Without a clear onboarding framework, customers struggle to adopt critical features.
Lack of Education: Many companies fail to teach customers how to use the product effectively, limiting its perceived value.

2. Limited Focus on Customer Success

Under-Resourced Teams: Small or overstretched CS teams can’t provide the attention customers need.
Poor Cross-Team Alignment: Miscommunication between CS, sales, and product teams often leads to missed opportunities or churn.
Reactive Churn Management: Waiting until customers are unhappy to take action puts you on the back foot.

3. Inadequate Customer Health Metrics

No Leading Indicators: Metrics like product adoption and engagement often go untracked, leaving churn risks unnoticed.
Overreliance on Lagging Indicators: Churn rates tell you what’s already happened—not what’s coming.
Weak Scoring Frameworks: Without a solid health score system, it’s hard to prioritize accounts that need attention.

4. Poor Expansion Strategies

No Playbooks for Growth: A lack of structured upsell and cross-sell strategies leads to missed revenue.
Misaligned Offerings: Packages that don’t match customer maturity or needs can create friction.
Reluctance to Embrace Value-Based Pricing: Sticking with static pricing models leaves money on the table.

5. Reactive, Not Proactive, Customer Management

Only Responding to Issues: Companies that wait for customers to complain often lose them.
Lack of Strategic Touchpoints: Regular check-ins are critical for building trust and identifying needs early.
Failure to Predict Churn: Without predictive analytics, churn risks can escalate unnoticed.

Each of these obstacles can undermine your ability to grow NRR.

The good news? They’re all solvable with the right CX framework.

Strategies to Overcome These NRR Barriers

Breaking through the challenges to achieve world-class NRR requires a proactive and strategic approach to CX.

Here are actionable steps to tackle the most common obstacles:

1. Streamline Onboarding Processes

Set Clear Time to Value Goals: Aim for customers to see value within 30 days to boost engagement early.
Build Scalable Frameworks: Create repeatable onboarding workflows to ensure consistency across accounts.
Continuously Refine: Use customer feedback to identify pain points and improve the onboarding experience over time.

2. Invest in Customer Success as a Strategic Function

Expand Resources: Ensure your CS team has the capacity to support customers effectively.
Foster Collaboration: Align CS with product and sales teams to improve communication and outcomes.
Implement Churn Prevention Early: Proactively address risk factors before they turn into churn.

3. Leverage Data-Driven Insights

Track Leading Indicators: Monitor metrics like product adoption and engagement to catch issues early.
Use Health Scores Wisely: Develop a robust scoring system to prioritize at-risk customers.
Identify Expansion Opportunities: Analyze data to uncover upsell and cross-sell potential.

4. Build and Execute an Expansion Playbook

Personalize Growth Strategies: Tailor upsell and cross-sell approaches to each customer’s needs and maturity level.
Align Offerings with Maturity: Package products and services to match where customers are in their journey.
Monitor Results: Use clear metrics to track the success of your expansion efforts.

5. Shift to Proactive Customer Management

Schedule Regular Check-Ins: Strategic touchpoints keep you ahead of potential issues.
Develop Risk Playbooks: Create standardized processes to address common churn risks.
Embrace Predictive Analytics: Use data to forecast churn and take action before it happens.

By focusing on these strategies, early-stage SaaS companies can transform NRR from a challenge into a strength, ensuring long-term growth and customer loyalty.

Conclusion

Achieving world-class Net Revenue Retention (NRR) is one of the biggest growth levers for early-stage SaaS companies.

While obstacles like weak onboarding, limited Customer Success investment, and poor expansion strategies can hold you back, they’re entirely solvable with the right focus.

Start by refining your onboarding processes, equipping your CS team to be proactive, and leveraging data to identify risks and opportunities. Build playbooks for expansion and ensure regular touchpoints with customers to deepen trust and value.

The companies that succeed in reaching world-class NRR levels don’t just rely on a great product—they invest in a customer-first strategy that drives retention and growth.

Need help optimizing your NRR strategy?