Definition
Renewal rate is the % of contracts that renew at the end of term. It is a contract-based lens on retention for annual or multi-year deals.
Example
If 80 of 100 contracts renew at term end, renewal rate is 80%.
How to use it
- Track renewal rate by cohort start year and segment (deal size, industry).
- Renewal rate can differ from monthly churn because the timing is lumpy.
- Separate auto-renewals from manual renewals to spot risk.
Common mistakes
- Using renewal rate without checking expansion or contraction.
- Counting early renewals in the wrong period.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Renewal Rate" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Read the related guide (e.g., Retention & churn hub: cohorts, GRR/NRR, and retention curves) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- CAC Payback Period Calculator: Estimate how many months it takes to recover CAC (months to recover CAC) using gross profit.
- CAC Payback Sensitivity Calculator: See how CAC payback months change as ARPA and gross margin vary (simple 3x3 sensitivity).
- Churn Rate Calculator: Calculate customer churn rate for a period and compare retention across segments or cohorts.
- Retention Rate Calculator: Calculate retention rate for a period accounting for new customers.
- ARPU Calculator: Calculate Average Revenue Per User (ARPU) for a period and understand the ARPU formula.
Guides
- Retention & churn hub: cohorts, GRR/NRR, and retention curves: A practical hub for retention measurement: churn rate, GRR/NRR, cohort retention curves, and how to set retention targets without getting misled by noise.