Can NRR be 123% in this packet?
Finance reports ending company ARR of $1.23m. Customer Success reports net retention of 103%. Reconcile both.
The question
Alder Relay is a fictional B2B subscription-software company with Boston and London teams. This is an interview case, using an authored packet rather than a real CRM export.
| USD | |
|---|---|
| Opening existing-customer cohort | 1000000 |
| Churn | 80000 |
| Contraction | 40000 |
| Expansion | 150000 |
| New customers | 200000 |
Separate complete toy year. No reactivations, FX, acquisitions or cohort migrations. Use the opening existing-customer cohort for retention; use all customers for ending company ARR.
“State the measure, the evidence and the next owner.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Fix the opening cohort
What would you do here? Open the move you’d make.
Keep the existing-customer cohort
The strong move. The denominator is a cohort, not all current customers.
Include new customers in the cohort
Tempting, but it misses something. New business was not part of the opening customer group.
See how a strong candidate says it
“Retention follows the $1m of customers present at the start of the year. New customers are a separate movement.”
Why it works: The denominator is a cohort, not all current customers.
Step 2: Calculate gross retention
What would you do here? Open the move you’d make.
Remove churn and contraction
The strong move. Gross retention excludes expansion and new customers.
Add expansion into gross retention
Tempting, but it misses something. Expansion belongs in net retention, not gross retention.
See how a strong candidate says it
“$1m − $80k churn − $40k contraction = $880k. Gross retention is 88%.”
Why it works: Gross retention excludes expansion and new customers.
Step 3: Calculate net retention
What would you do here? Open the move you’d make.
Report $1.03m/$1m
The strong move. Net retention includes changes from the opening cohort.
Report $1.23m/$1m as NRR
Tempting, but it misses something. The extra $200k came from new customers.
See how a strong candidate says it
“Add $150k expansion to reach $1.03m for the same cohort. NRR is 103%.”
Why it works: Net retention includes changes from the opening cohort.
Step 4: Bridge to the company total
What would you do here? Open the move you’d make.
Show the movements and owners
The strong move. The two measures answer different questions and reconcile through a bridge.
Force both teams to report 123%
Tempting, but it misses something. That would erase the distinction between retention and total growth.
See how a strong candidate says it
“Add new-customer ARR of $200k to reach $1.23m company ARR. I would ask Finance and CS to approve the shared movement definitions.”
Why it works: The two measures answer different questions and reconcile through a bridge.
The answer, in short
- Decision
- NRR is 103%; company ending ARR is $1.23m.
- Because
- New customers explain the $200k difference.
- What would change it
- Reactivation, FX or cohort changes would require explicit extra movements.
Common traps
- New business was not part of the opening customer group.
Check your answer
- I kept the opening cohort fixed.
- I excluded expansion from gross retention.
- I excluded new business from NRR.
- I bridged to company ARR.
Last reviewed Nov 10, 2026