The terms “Renewal” and “Retention” are throw around like “Affect” and “Effect”. Most people just 50/50 YOLO it when broadly referring to “keeping customers around.”
Second Year FP&A Analyst Presenting to CFO
Today we’ll tackle four common points of confusion.
TL;DR:
Renewal Rate vs Retention Rate: Renewal is based on Contract End Date, Retention is based on Contract Start Date
Renewal Rate Land Mines: Beware of Pull Forwards to hit goals, over discounting, and comparability issues from period to period
Dollar vs Account Measurement: Dollar rate is almost always higher than Account rate, as stickier, larger accounts subsidize smaller, fleeting accounts
Gross vs Net Retention: Gross max is 100%. Net max is infinity. The difference is if you include expansion dollars or not
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