Net Dollar Retention

Net Dollar Retention (NDR) measures how well a business retains revenue from existing customers over a specific period, accounting for upgrades, downgrades, and churn. It is expressed as a percentage. NDR greater than 100% indicates revenue growth from existing customers. NDR below 100% indicates revenue decline.

Net Dollar Retention is calculated using the formula:

NDR = ((Starting MRR + Expansion − Contraction − Churn) ÷ Starting MRR) × 100%

For example, if a company starts with $100,000 MRR, adds $20,000 in expansion, loses $5,000 to contractions, and loses $10,000 to churn, NDR = ((100,000 + 20,000 − 5,000 − 10,000) ÷ 100,000) × 100% = 105%.

Net Dollar Retention vs. Net Revenue Retention:

Net Dollar Retention (NDR): Percentage measure over a specific period for existing customers Net Revenue Retention (NRR): Percentage measure over a rolling 12-month window for all customers Key difference: NDR is a period snapshot for current customers, NRR covers the entire customer base over time

Industry benchmarks for Net Dollar Retention vary by business model:

• B2B SaaS: 105-130% is considered strong
• Enterprise software: 120-140% for established products
• B2C SaaS: 95-115% is typical
• E-commerce subscriptions: 90-110% depending on product category
• Industry median: 100-111% for SaaS companies per OpenView (2022)

Key factors that drive Net Dollar Retention include:

• Product stickiness: Depth of use and frequency
• Expansion opportunities: Clear upgrade paths and add-ons
• Customer success: Outcome-driven onboarding and support
• Pricing strategy: Value-aligned pricing and packaging
• Product development: Features that increase utility and adoption

Net Dollar Retention directly impacts critical business metrics:

• Revenue stability: Consistent or growing NDR indicates strong recurring revenue
• Cost efficiency: High NDR leverages existing customers relative to CAC
• Customer satisfaction: Upgrades vs downgrades and churn reveal perceived value
• Valuation: Higher NDR correlates with stronger valuation multiples

How to improve NDR:

• Customer success initiatives: Proactive, outcome-driven engagement
• Upselling and cross-selling: Value-add paths to higher tiers and add-ons
• Training and onboarding: Short time-to-value to reduce early churn
• At-risk engagement: Identify and address downgrade or churn risk early
• Pricing and packaging: Align tiers and features with realized value
• Feedback loops: Continuously collect and act on product feedback
• Contract reviews: Align renewals with evolving customer needs

NDR highlights how a business interacts with its existing customers and guides where to invest for sustainable growth.