Brett LindenbergThe retention ratio formula is (net income − dividends) ÷ net income. The result is the share of a company's profit that it keeps instead of paying to shareholders, so a company that earns $5 million and pays $2 million in dividends has a retention ratio of 60%. Investors also call it the plowback ratio, and it always equals 1 minus the dividend payout ratio. If you need the customer retention rate instead, the formula is ((E − N) ÷ S) × 100, where S is the number of customers at the start of a period, E is the number at the end, and N is the number you acquired during the period. In the demo below, check a customer retention calculation for one quarter.
Which retention formula do you need?
Finance teams use the retention ratio. Subscription, customer success, and HR teams use retention rates. Pick the row that matches your question.
| Measure | Formula | Question it answers |
|---|---|---|
| Retention ratio (plowback ratio) | (Net income − Dividends) ÷ Net income | How much of its profit does the company keep? |
| Customer retention rate | ((E − N) ÷ S) × 100 | What share of existing customers stayed? |
| Customer churn rate | (Customers lost ÷ S) × 100 | What share of existing customers left? |
| Gross revenue retention (GRR) | (Starting MRR − Contraction − Churned MRR) ÷ Starting MRR | How much recurring revenue did existing customers keep, before upgrades? |
| Net revenue retention (NRR) | (Starting MRR + Expansion + Reactivation − Contraction − Churned MRR) ÷ Starting MRR | Did revenue from existing customers grow on its own? |
| Employee retention rate | (Employees on staff for the whole period ÷ Employees at the start) × 100 | What share of staff stayed? |
| Video audience retention | Seconds watched ÷ Video length | How much of a video do viewers see? |
The rate formulas share one rule: fix the starting group, then measure what is left of that group at the end. New customers, new hires, and revenue from new accounts never count as retained. "Retention factor" and "retention time" are chromatography terms, covered in the common questions at the end.
What is the retention ratio in finance?
The retention ratio is the share of net income a company keeps in the business instead of paying out as dividends. Wall Street Prep's guide to the retention ratio notes that it is also called the plowback ratio. Investors use it to see how a company splits its profit between reinvestment and cash returned to shareholders.
Retention ratio formula
You can write the formula three ways, and all of them give the same answer:
- Retention ratio = (Net income − Dividends) ÷ Net income
- Retention ratio = 1 − Dividend payout ratio, where the payout ratio is Dividends ÷ Net income
- Retention ratio = (Earnings per share − Dividends per share) ÷ Earnings per share
How to calculate the retention ratio step by step
- Find net income for the fiscal year on the income statement.
- Find dividends for the same year. Use "dividends paid" in the financing section of the cash flow statement, or "dividends declared" in the statement of shareholders' equity. Pick one and use it every year.
- Subtract dividends from net income to get the profit the company kept.
- Divide that amount by net income and multiply by 100.
In a spreadsheet, put net income in B1 and dividends in B2, then enter =(B1-B2)/B1 in B3 and format B3 as a percentage. Avoid using the change in balance-sheet retained earnings, because share buybacks and accounting adjustments also move that balance. Try the calculation with a fictional company that earns $5 million and pays $2 million in dividends.
Retention ratio example: Apple, fiscal 2025
Apple's Form 10-K for the fiscal year ended September 27, 2025 reports net income of $112,010 million and payments for dividends and dividend equivalents of $15,421 million. The retention ratio is (112,010 − 15,421) ÷ 112,010 = 86.2%, so the payout ratio is 13.8%. The per-share version agrees: diluted earnings of $7.46 per share and declared dividends of $1.02 per share give 86.3%.
| Item | Value |
|---|---|
| Net income | 112,010 |
| Dividends and dividend equivalents paid | 15,421 |
| Retention ratio | 86.2% of net income |
| Repurchases of common stock | 90,711 |
| Dividends plus repurchases | 94.8% of net income |
The example exposes the ratio's main weakness: it counts only dividends. Apple returned most of its profit through share repurchases, which the formula ignores, so an 86.2% retention ratio overstates how much profit stayed in the business. Apple's balance sheet shows an accumulated deficit of $14,264 million at the end of fiscal 2025, because the company charges repurchases against retained earnings. When a company buys back stock, read the retention ratio next to the cash flow statement.
How to read a high or low retention ratio
A ratio close to 100% means the company pays little or no dividend and reinvests most of its profit. Wall Street Prep notes that this is typical of growth-stage companies, and that keeping more profit helps only if the company earns a return on it. Check return on equity or return on invested capital before you treat a high ratio as a strength.
A low ratio means the company pays out most of its profit, which is common for mature companies with fewer places to reinvest. A negative ratio means dividends were larger than net income that year. When net income is negative, the ratio has no useful meaning; report the loss and the dividend separately.
The retention ratio also feeds the sustainable growth rate. Wall Street Prep's 2024 guide to the sustainable growth rate gives the formula as retention ratio × return on equity. A company that keeps 50% of its earnings and earns a 25% return on equity can sustain about 12.5% growth a year without changing its mix of debt and equity.
How to calculate customer retention rate
The customer retention rate (CRR) formula is ((E − N) ÷ S) × 100. S is the number of customers at the start of the period, E is the number at the end, and N is the number of new customers acquired during the period. Zendesk's guide to calculating customer retention rate and the Contentsquare guide to customer retention metrics use the same formula. Subtracting N removes new customers, so the result describes only the customers you already had.
Customer retention rate example
A subscription box service starts the quarter on January 1 with 2,000 active subscribers. It signs up 300 new subscribers during the quarter and ends on March 31 with 2,150.
- Remove the new subscribers from the ending count: 2,150 − 300 = 1,850 original subscribers who stayed.
- Divide by the starting count: 1,850 ÷ 2,000 = 0.925.
- Multiply by 100: the customer retention rate is 92.5% for the quarter.
The other 150 original subscribers cancelled, so the churn rate for the quarter is 150 ÷ 2,000 = 7.5%.
Count the starting group directly when you can
The (E − N) shortcut has one flaw. A customer who signs up and cancels inside the same period counts in N but not in E, so the formula subtracts someone who was never in the starting group. Suppose you start with 100 customers, keep 90 of them, and sign up 10 new customers, 2 of whom cancel before the period ends. You end with 98 customers. The shortcut gives (98 − 10) ÷ 100 = 88%, while the true share of the original 100 who stayed is 90%.
If you have a customer list, mark each customer "Yes" or "No" in column B for active on day one and in column C for active on the last day. Then =COUNTIFS(B:B,"Yes",C:C,"Yes")/COUNTIF(B:B,"Yes") in Google Sheets or Excel gives the retention rate of the starting group. Write down two rules before you count:
- What "active" means, such as a paid subscription, an open contract, or a purchase within a set window.
- How you treat returning customers. A customer active on both the first and last day counts as retained. A former customer who comes back during the period counts as acquired, because they were not in the starting group.
Choose the period and keep it fixed
Match the period to how customers renew. Monthly subscriptions call for a monthly rate. Annual contracts call for an annual rate, because a monthly rate shows almost no churn outside renewal months. Compare periods of the same length, since a monthly rate and an annual rate for the same business can look very different.
Patient, member, and repeat-customer retention
The same formula works for a clinic, a gym, or a membership program. The hard part is defining "active," because patients and shoppers rarely cancel. A clinic might count a patient as active after a visit within a window that matches its recall schedule, then measure how many of those patients return in the next window. Shops without subscriptions can use the repeat purchase rate from Contentsquare's guide: customers who bought more than once ÷ total customers × 100.
How to calculate net revenue retention for SaaS
A customer count treats a $50-a-month account and a $5,000-a-month account the same. Revenue retention weights each account by what it pays. ChartMogul, which sells subscription analytics, defines the two standard measures in its net revenue retention and gross revenue retention guides:
- Gross revenue retention (GRR) = (Starting MRR − Contraction MRR − Churned MRR) ÷ Starting MRR. It ignores upgrades, so it can never exceed 100%.
- Net revenue retention (NRR) = (Starting MRR + Expansion MRR + Reactivation MRR − Contraction MRR − Churned MRR) ÷ Starting MRR. It includes upgrades, so it can exceed 100%.
MRR is monthly recurring revenue. Both measures use only customers who were paying at the start of the period, usually 12 months ago. In ChartMogul's worked example, four customers paid $770 in MRR a year ago. Since then, one cancelled, two downgraded, and one upgraded, and the three retention measures tell different stories.
| Measure | Calculation | Result |
|---|---|---|
| Customer retention | 3 of 4 customers still paying | 75% |
| Gross revenue retention | $630 ÷ $770 (upgrade excluded) | 81.8% |
| Net revenue retention | $800 ÷ $770 (upgrade included) | 103.9% |
NRR above 100% means the customers you already had grew their spending by more than you lost to cancellations and downgrades. A high NRR with a low GRR means a few accounts are expanding while many others shrink or leave, so track both. Idomoo's beginner's guide to retention rate calls the same measure net dollar retention and gives the matching formula.
ChartMogul's 2023 SaaS Retention Report, based on data from more than 2,100 SaaS businesses, found that companies with net retention over 100% grew 43.6% a year, compared with 13.1% a year for companies under 60%. Results varied with price point:
- Among businesses with an average revenue per account (ARPA) above $500 a month, 41.1% of businesses had NRR above 100%. The top quartile of this group reached 109.3% NRR, GRR of 90% or more, and 85.7% customer retention.
- Among businesses with ARPA below $10 a month, only 2.7% of businesses had NRR above 100%. The top quartile of this group reached 65.1% NRR and 63.1% customer retention.
Employee retention rate and turnover
The employee retention rate uses the same idea as customer retention. HR Morning's guide to employee retention divides the number of employees who stayed for the whole period by the number on staff at the start, then multiplies by 100. People hired during the period do not count. If you start the year with 40 employees and 36 of them are still there at the end, retention is 90%. In the demo below, a team starts with 50 people, hires 8, and ends with 46.
Turnover uses a different calculation, so retention and turnover rarely add up to 100%. The US Bureau of Labor Statistics computes the separations rate by dividing separations by employment and multiplying by 100. Separations include people hired and lost within the same period, so one hard-to-fill role can produce several separations in a year. Use retention to see how many of your original people stayed, and turnover to see how much churn the organization absorbed.
Learning and development teams often track retention for a training cohort: the share of employees who finished a program and are still employed a year later. Compare that cohort with a similar group that skipped the program, because people who volunteer for training may already be more likely to stay. AIDAR Solutions' guide on how to reduce employee turnover covers causes such as poor management and limited growth. ThinkInLeverage argues for giving each employee work at their learning sweet spot, just past their current skill. For a full measurement plan, see our guide on how to measure training effectiveness.
Video audience retention and knowledge retention
If you use video for training, onboarding, or marketing, two more retention measures apply.
Video audience retention
Video audience retention is how much of a video viewers watch. In Mindstamp, a view's watched percentage counts the unique seconds the viewer played, divided by the video length, as our reporting help page explains. Mindstamp reporting also shows drop-off by section on supported plans, so you can see where viewers stop. Across 8.07 million views of 18,315 Mindstamp videos (2018 to October 2026), the average view played 46.5% of the video, with averages from 39.2% for videos of 2 to 5 minutes up to 59.4% for videos of 1 minute or less. These figures come from Mindstamp customers' training, marketing, and sales videos, so they do not represent all online video. Our guide on how to increase video audience retention covers fixes for the points where viewers leave, and the guide to video engagement metrics covers what else to track.
Knowledge retention
Knowledge retention is how much learners still know some time after training. No standard formula exists, so define yours before you measure. One option: learners who pass a check 30 days after training ÷ learners who completed the training × 100. Set the pass mark and the delay in advance and keep them the same for every program you compare.
A short follow-up video with in-video questions works well for the delayed check. Mindstamp stores each answer against the learner, and you can export the results. A number question lets learners type the result of a calculation instead of picking from a list. The delayed knowledge retention check example shows one version, and our guide to knowledge retention strategies covers how to make training stick.
What is a good retention rate?
The answer depends on the measure. A financial retention ratio has no single good value. A young company that reinvests everything can sit at 100%, and a mature company that pays most of its profit as dividends can be healthy at a much lower ratio. Judge it against the return the company earns on what it keeps.
Customer retention varies by industry. Exploding Topics' customer retention statistics (updated September 2025) compile averages from a 2018 CustomerGauge report and a 2020 Aspect consumer index report: 84% customer retention in media and professional services, 63% in retail, and 55% in hospitality, travel, and restaurants. The underlying data is several years old, so use it as rough context. SaaS companies can compare themselves with the ChartMogul figures above at a similar price point, and Contentsquare's guide calls a monthly customer retention rate of 95% good for SaaS.
Your own trend tells you more than any of these averages. Measure the same way each quarter, and the direction of your rate will show whether your changes are helping.
How to improve customer retention
Frederick Reichheld of Bain & Company found that increasing customer retention rates by 5% increases profits by 25% to 95%, as Harvard Business Review reported in 2014. The same article says acquiring a new customer costs five to 25 times more than keeping one, and Sprinklr's roundup of customer retention statistics repeats the 5% figure. Start with these steps:
- Find out where customers leave. Read cancellation reasons, look for usage that drops before renewal, and segment your retention rate by signup month or plan to see which group is leaving.
- Get new customers to their first result quickly. A customer who never gets value during onboarding has little reason to renew. Our guide to customer onboarding best practices covers how to shorten that path.
- Teach customers your product, so they know how to get results from what they bought. See our guide to educating the customer.
- Train the people customers talk to. A billing error or a slow fix is often the moment a customer decides whether to stay. In the billing error recovery example, a support agent chooses the first response after a duplicate charge and sees how the customer reacts. Our guide to video customer service training shows how to build drills like this with video branching.
- Win back customers who are about to leave. For apps, Vermillion's guide to mobile app retention strategies covers onboarding messages, segmentation, and win-back campaigns.
Retention measures whether customers stay. Loyalty describes whether they would choose you again with an easy alternative in front of them. A customer held by a contract counts as retained until the contract ends. Pair your retention rate with a measure of preference, such as repeat purchases or a satisfaction survey.
Common questions about retention ratios and rates
What is the difference between retention and churn?
They describe the same starting group from opposite sides. When both use the same customers and the same period, customer churn rate = 100% − customer retention rate, so a 92.5% retention rate means 7.5% churn. For revenue, churn includes downgrades as well as cancellations, which is why GRR and NRR exist.
Can a retention rate be more than 100%?
A customer retention rate cannot. If yours is above 100%, you left new customers in the ending count or used the wrong start date. Net revenue retention can exceed 100% because existing customers can spend more. The financial retention ratio tops out at 100%, when a company pays no dividend, and turns negative when dividends exceed net income.
How is the retention ratio different from the payout ratio?
The payout ratio is dividends ÷ net income, the share of profit paid to shareholders. The retention ratio is the share kept, and the two always add up to 100%. In Wall Street Prep's example, a company with $100,000 of net income that pays $40,000 in dividends has a 40% payout ratio and a 60% retention ratio.
How do you calculate retention factor or retention time in chromatography?
These chemistry terms have no link to the business ratios above. Retention time comes straight from the chromatogram: David Harvey's Analytical Chemistry 2.1 defines it as the time between the sample's injection and the maximum of the solute's peak. The retention factor in column chromatography is k = (tr − tm) ÷ tm, where tm is the void time, the time an unretained solute takes to elute. The same text defines selectivity as the ratio of two retention factors. In thin-layer and paper chromatography, the retardation factor (often called the retention factor) is RF = distance moved by the substance ÷ distance moved by the solvent front.
How often should you calculate retention?
Use one fixed cycle that matches how your customers pay or renew: monthly for monthly subscriptions, quarterly or annually for annual contracts, and once a fiscal year for the financial retention ratio. To start, pick the formula from the table at the top of this guide, pull last period's start, end, and new counts, and calculate a baseline. Then repeat the same calculation, with the same definitions, every period.
Sources and further reading
- Emarsys's 2025 roundup of customer loyalty statistics, a vendor compilation of published loyalty surveys. Check each figure against its original study before you cite it.
- Martechdo's guide to customer retention rate calculation, which applies the ((E − N) ÷ S) × 100 formula to B2B revenue operations.
