Definitional sensitivity
The same data yields a family of NRRs. The spread between them is a finding about the business, not an error.
Also NRR sensitivity · Definition spread · Retention variants side by side
A report under this standard computes its headline retention under all defined variants and toggles — same data, same period, only the definition changes — and reports the spread between them in percentage points. A wide spread is not an error to be resolved. It is a property of the business, and it is a finding.
- Formula
spread = the highest NRR variant − the lowest, in percentage points- Unit
- percentage points
- Bounded
- ≥ 0
- Defaults
- six NRR variants computed · warn when the spread exceeds 5 points
- Biggest lever
- Usage inclusion — 14 of the 27 points in the worked example
- Read with
- NRR · GRR · The register
- Appears in
- Diligence preparation · Board deck · Methodology note
- Switches
- 1 · 0 locked — see the choices
What it measures
Every other entry in this reference describes one measure and names the choices that move it. This one measures the moving.
The premise is uncomfortable and worth stating plainly: for most businesses, there is no single true NRR. There is a family of defensible NRRs, and which one gets quoted is a choice. Ordinary metrics reporting hides that choice by presenting one number. Sensitivity analysis inverts it — it presents the whole family and lets the spread carry information.
A narrow spread means the headline is robust. Whatever definitional argument a counterparty brings, the answer barely moves. That is a strong position, and the company should know it before the meeting.
A wide spread means the headline is definition-fragile. The number depends more on the convention than on the business. This is not an accusation — usage- heavy businesses and those with irregular billing are structurally fragile here — but it means any single quoted figure is a claim about methodology as much as about performance, and diligence will find the least flattering variant.
Either way, the company learns what a buyer will compute before the buyer computes it. That is the entire purpose.
How it is computed
At the cutoff, the same customer-month data is measured under every combination the standard defines. For NRR: TTM compounded (the default), TTM usage-exclusive, TTM reactivation-exclusive, year-over-year snapshot usage-inclusive and usage-exclusive, and quarterly annualized. For GRR: the corresponding set.
The default variant is marked. The spread is the maximum NRR minus the
minimum, in percentage points, and a spread exceeding
thresholds.nrr_spread_warn_points raises a finding.
Because every row runs against the identical data over the identical period, the only difference between any two rows is the definition. Nothing else can explain the gap.
Worked example
| Definition | NRR |
|---|---|
| TTM compounded · usage-incl · reactivation-incl (default) | 112.4% |
| TTM compounded · usage-exclusive | 98.1% |
| TTM compounded · reactivation-exclusive | 109.7% |
| YoY snapshot · usage-inclusive | 104.2% |
| YoY snapshot · usage-exclusive | 91.6% |
| Quarterly annualized | 118.9% |
| Spread | 27.3 points |
One business, one period, one dataset. The company can honestly say “our NRR is 112%.” A buyer can equally honestly say “your NRR is 92%.” Both are computing correctly, and the argument that follows is not about the data at all.
The instructive comparison is the usage pair: 14 points between usage-inclusive and usage-exclusive on the same variant. That single fact — that consumption revenue carries a seventh of this company’s apparent retention — is more informative than any individual row, and it is invisible in a report that gives one number.
The choices that change the number
The spread is made of choices; the meta-choices are:
- Which variants are in scope. This standard fixes the set so the spread is comparable across reports. Curating the set — dropping the variant that reads worst — would defeat the exercise.
- The warning threshold. Five points by default. A convention for flagging, not a judgment about the business.
- Whether to publish it at all. The standard’s answer is that it is not optional. A table that exists to show fragility cannot be suppressed when the fragility is high without destroying the guarantee it provides.
How it is misread
A wide spread read as a data-quality problem. It usually is not. It reflects genuine composition — usage mix, reactivation frequency, seasonality — and cleaning the data will not narrow it.
The most favourable variant selected for the headline. The table makes this visible, which is its point. A company that quotes its best variant while publishing all of them is making a disclosed choice; one that quotes it while publishing nothing else is making an undisclosed one.
The spread compared across companies as a quality score. Spread is driven by business model. A pure subscription business will have a narrow spread almost regardless of how well it is run.
What it cannot tell you
Sensitivity analysis cannot tell you which definition is right. That depends on the question being asked, and reasonable parties will differ. What it guarantees is that nobody is surprised — that the range is known to both sides before the negotiation, and that the discussion is about which convention fits rather than about whose spreadsheet is correct.
How to state it
A disclosure that travels with the number. Replace the braces; keep the parenthesis.
NRR {x}% (default) · range {min}–{max}% across six variants · spread {s} points (SoF Standard v1.0) Before you quote it
- All variants computed, none curated away?
- Default variant marked?
- Spread reported in points?
- The usage pair explained?
Related questions
- Is there a single true NRR for a business?
- For most businesses, no. There is a family of defensible NRRs, and which one is quoted is a choice. Sensitivity analysis presents the whole family so the spread carries information: a narrow spread means the headline is robust to any definitional argument; a wide spread means the number depends more on convention than on the business, and diligence will find the least flattering variant.
- Which NRR definition should I report to the board or to investors?
- The standard's default — trailing twelve months compounded, usage-inclusive, reactivation-inclusive — with the variant named and the sensitivity table beside it. An investor will compute the least flattering variant anyway; showing all of them first turns a methodology argument into a conversation about which convention fits.
- How much can definition choices move NRR?
- By tens of points on the same data. In the worked example the spread across six variants is 27 points, and 14 of them come from usage inclusion alone. Usage-heavy and irregularly billed businesses are structurally fragile here; a pure subscription business barely moves.
- How do public companies define net dollar retention?
- Differently, and legibly only in footnotes: trailing-twelve-month averages versus point-in-time snapshots, customers above a spend threshold, acquired revenue excluded for a year, usage in or out. That variety is the case for a shared standard, and the reason a headline from a filing is not a benchmark for a private company until its footnote has been read.
- How should NRR methodology be disclosed?
- Alongside the number: variant, basis, window, reactivation treatment, entity resolution, and any threshold or exclusion. Under this standard that is one line — the version, plus any switch changed from its default.
Strategy of Finance. “Definitional sensitivity.” SoF Standard Definitions v1.0 (2026-09-18). https://www.strategyoffinance.com/standards/definitional-sensitivity/