Renewal rate is the percentage of customers who renew their contract when it comes up for renewal. It is a direct measure of retention at the contract level and a key input to revenue predictability. A low renewal rate means acquisition is refilling losses rather than driving growth.

Renewal rate is where all your retention work shows up as a number. Everything upstream, onboarding, time to value, QBRs, exists to move this one figure. And it compounds: a business renewing 90% of customers is on completely different footing than one renewing 70%, because the second is running to stand still. Small improvements here change the entire growth math.

Example:

Renewing 92 of 100 contracts gives a 92% renewal rate. The 8% lost is what acquisition must replace before any growth even begins.

How is renewal rate different from retention rate?

Renewal rate measures customers renewing at contract renewal points specifically. Retention rate can measure customers kept over any period, renewal or not.

Why does renewal rate compound?

A higher renewal rate means less revenue to replace each period, so more of acquisition drives growth rather than offsetting losses.