Net Dollar Retention %
Growth
Usage
Industry:
SaaS
Short Definition
Net Dollar Retention (NDR), or Net Revenue Retention (NRR), measures the percentage of recurring revenue retained from an existing customer base over a period. It accounts for all revenue changes within that cohort: expansion (upsells, cross-sells, add-ons), contraction (downgrades, reductions), and logo churn (cancellations). NDR excludes new customer revenue, focusing solely on existing customer base performance.
Short Definition
Net Dollar Retention (NDR), or Net Revenue Retention (NRR), measures the percentage of recurring revenue retained from an existing customer base over a period. It accounts for all revenue changes within that cohort: expansion (upsells, cross-sells, add-ons), contraction (downgrades, reductions), and logo churn (cancellations). NDR excludes new customer revenue, focusing solely on existing customer base performance.
Short Definition
Net Dollar Retention (NDR), or Net Revenue Retention (NRR), measures the percentage of recurring revenue retained from an existing customer base over a period. It accounts for all revenue changes within that cohort: expansion (upsells, cross-sells, add-ons), contraction (downgrades, reductions), and logo churn (cancellations). NDR excludes new customer revenue, focusing solely on existing customer base performance.
Why it matters for Investors
Ultimate Sign of Product Value and Stickiness: NDR above 100% proves expansion revenue from existing customers outweighs churn and contraction, signaling high product value, customer satisfaction, and loyalty
Indicator of Capital-Efficient Growth: High NDR demonstrates efficient growth, as retaining and expanding existing customers is more cost-effective than new customer acquisition, reducing reliance on expensive sales and marketing
Predictor of Sustainable Growth: Companies with NDR over 100% can grow revenue even without new customers, de-risking the business model and predicting future revenue stability and profitability, making them attractive investments
Key Driver of Valuation: NDR directly correlates with higher valuation multiples. Investors pay a premium for companies that retain customers and consistently increase their value over time; NDR above 120% is considered "best-in-class"
Why it matters for Investors
Ultimate Sign of Product Value and Stickiness: NDR above 100% proves expansion revenue from existing customers outweighs churn and contraction, signaling high product value, customer satisfaction, and loyalty
Indicator of Capital-Efficient Growth: High NDR demonstrates efficient growth, as retaining and expanding existing customers is more cost-effective than new customer acquisition, reducing reliance on expensive sales and marketing
Predictor of Sustainable Growth: Companies with NDR over 100% can grow revenue even without new customers, de-risking the business model and predicting future revenue stability and profitability, making them attractive investments
Key Driver of Valuation: NDR directly correlates with higher valuation multiples. Investors pay a premium for companies that retain customers and consistently increase their value over time; NDR above 120% is considered "best-in-class"
Why it matters for Investors
Ultimate Sign of Product Value and Stickiness: NDR above 100% proves expansion revenue from existing customers outweighs churn and contraction, signaling high product value, customer satisfaction, and loyalty
Indicator of Capital-Efficient Growth: High NDR demonstrates efficient growth, as retaining and expanding existing customers is more cost-effective than new customer acquisition, reducing reliance on expensive sales and marketing
Predictor of Sustainable Growth: Companies with NDR over 100% can grow revenue even without new customers, de-risking the business model and predicting future revenue stability and profitability, making them attractive investments
Key Driver of Valuation: NDR directly correlates with higher valuation multiples. Investors pay a premium for companies that retain customers and consistently increase their value over time; NDR above 120% is considered "best-in-class"
Formula
Practical considerations:
Cohort-Based Calculation: NDR is always calculated for a specific group (cohort) of customers that existed at the start of the period. Revenue from any new customers acquired during the period is strictly excluded from the calculation
All Revenue Changes Included: The formula must account for all recurring revenue changes from the starting cohort, including positive changes (upsells, cross-sells) and negative changes (downgrades, cancellations)
Time Period Consistency: NDR can be calculated monthly, quarterly, or annually, but the time period must be consistent for meaningful analysis. Annual calculations are most common for strategic planning and investor reporting
Formula
Practical considerations:
Cohort-Based Calculation: NDR is always calculated for a specific group (cohort) of customers that existed at the start of the period. Revenue from any new customers acquired during the period is strictly excluded from the calculation
All Revenue Changes Included: The formula must account for all recurring revenue changes from the starting cohort, including positive changes (upsells, cross-sells) and negative changes (downgrades, cancellations)
Time Period Consistency: NDR can be calculated monthly, quarterly, or annually, but the time period must be consistent for meaningful analysis. Annual calculations are most common for strategic planning and investor reporting
Formula
Practical considerations:
Cohort-Based Calculation: NDR is always calculated for a specific group (cohort) of customers that existed at the start of the period. Revenue from any new customers acquired during the period is strictly excluded from the calculation
All Revenue Changes Included: The formula must account for all recurring revenue changes from the starting cohort, including positive changes (upsells, cross-sells) and negative changes (downgrades, cancellations)
Time Period Consistency: NDR can be calculated monthly, quarterly, or annually, but the time period must be consistent for meaningful analysis. Annual calculations are most common for strategic planning and investor reporting
Worked Example
Starting ARR (July 31): $2,589,000
Contract log (August):
Account | Event | Effective by Aug 31? | ARR @ Aug 31 | Δ ARR in Aug | Category |
|---|---|---|---|---|---|
A | New logo, annual $50k, signed Aug 20, starts Sep 1 | No | $0 | $0 | Booking / CARR |
B | Existing customer cancels $18k annual plan, eff. Aug 31 | Yes | $0 | -$18,000 | Logo Churn |
C | Existing customer downgrades plan (-$7k), eff. Aug 25 | Yes | -$7,000 | -$7,000 | Contraction |
D | Existing customer upgrades plan (+$15k), eff. Aug 10 | Yes | +$15,000 | +$15,000 | Expansion |
E | New logo, annual $40k, starts Aug 1 | Yes | $40,000 | +$40,000 | New |
NDR calculation:
Starting ARR: $2,589,000
Expansion ARR: +$15,000 (D)
Contraction ARR: -$7,000 (C)
Logo Churn ARR: -$18,000 (B)
Churn ARR = Contraction ARR + Logo Churn ARR = -$7,000 - $18,000 = $25,000
Ending ARR from Cohort: $2,589,000 + $15,000 - $7,000 - $18,000 = $2,579,000
Net Dollar Retention: ($2,579,000 / $2,589,000) * 100 = 99.6%
Notes:
The NDR calculation only considers the changes from the existing customer base (D, C, B) relative to the starting ARR
Revenue from new customers (A) and new contracts that are not yet effective (E) are excluded from the NDR calculation for this period
A monthly NDR of 99.6% indicates a slight net contraction from the existing customer base for August
Worked Example
Starting ARR (July 31): $2,589,000
Contract log (August):
Account | Event | Effective by Aug 31? | ARR @ Aug 31 | Δ ARR in Aug | Category |
|---|---|---|---|---|---|
A | New logo, annual $50k, signed Aug 20, starts Sep 1 | No | $0 | $0 | Booking / CARR |
B | Existing customer cancels $18k annual plan, eff. Aug 31 | Yes | $0 | -$18,000 | Logo Churn |
C | Existing customer downgrades plan (-$7k), eff. Aug 25 | Yes | -$7,000 | -$7,000 | Contraction |
D | Existing customer upgrades plan (+$15k), eff. Aug 10 | Yes | +$15,000 | +$15,000 | Expansion |
E | New logo, annual $40k, starts Aug 1 | Yes | $40,000 | +$40,000 | New |
NDR calculation:
Starting ARR: $2,589,000
Expansion ARR: +$15,000 (D)
Contraction ARR: -$7,000 (C)
Logo Churn ARR: -$18,000 (B)
Churn ARR = Contraction ARR + Logo Churn ARR = -$7,000 - $18,000 = $25,000
Ending ARR from Cohort: $2,589,000 + $15,000 - $7,000 - $18,000 = $2,579,000
Net Dollar Retention: ($2,579,000 / $2,589,000) * 100 = 99.6%
Notes:
The NDR calculation only considers the changes from the existing customer base (D, C, B) relative to the starting ARR
Revenue from new customers (A) and new contracts that are not yet effective (E) are excluded from the NDR calculation for this period
A monthly NDR of 99.6% indicates a slight net contraction from the existing customer base for August
Worked Example
Starting ARR (July 31): $2,589,000
Contract log (August):
Account | Event | Effective by Aug 31? | ARR @ Aug 31 | Δ ARR in Aug | Category |
|---|---|---|---|---|---|
A | New logo, annual $50k, signed Aug 20, starts Sep 1 | No | $0 | $0 | Booking / CARR |
B | Existing customer cancels $18k annual plan, eff. Aug 31 | Yes | $0 | -$18,000 | Logo Churn |
C | Existing customer downgrades plan (-$7k), eff. Aug 25 | Yes | -$7,000 | -$7,000 | Contraction |
D | Existing customer upgrades plan (+$15k), eff. Aug 10 | Yes | +$15,000 | +$15,000 | Expansion |
E | New logo, annual $40k, starts Aug 1 | Yes | $40,000 | +$40,000 | New |
NDR calculation:
Starting ARR: $2,589,000
Expansion ARR: +$15,000 (D)
Contraction ARR: -$7,000 (C)
Logo Churn ARR: -$18,000 (B)
Churn ARR = Contraction ARR + Logo Churn ARR = -$7,000 - $18,000 = $25,000
Ending ARR from Cohort: $2,589,000 + $15,000 - $7,000 - $18,000 = $2,579,000
Net Dollar Retention: ($2,579,000 / $2,589,000) * 100 = 99.6%
Notes:
The NDR calculation only considers the changes from the existing customer base (D, C, B) relative to the starting ARR
Revenue from new customers (A) and new contracts that are not yet effective (E) are excluded from the NDR calculation for this period
A monthly NDR of 99.6% indicates a slight net contraction from the existing customer base for August
Best Practices
Focus on Customer Onboarding: A personalized and effective onboarding process helps customers realize the product's value quickly, which is fundamental to long-term retention and future expansion
Drive Expansion Revenue: Proactively identify upsell and cross-sell opportunities. Structure pricing in tiers and offer valuable add-ons that encourage customers to increase their spend as their needs grow
Implement Proactive Customer Success: Use product analytics and customer health scores to identify at-risk customers before they churn. A dedicated customer success team can provide support and demonstrate ongoing value, which is key to minimizing churn and contraction
Gather and Act on Feedback: Regularly collect customer feedback through surveys (like NPS) and interviews to understand points of friction. Acting on this feedback to improve the product and customer experience directly impacts retention
Best Practices
Focus on Customer Onboarding: A personalized and effective onboarding process helps customers realize the product's value quickly, which is fundamental to long-term retention and future expansion
Drive Expansion Revenue: Proactively identify upsell and cross-sell opportunities. Structure pricing in tiers and offer valuable add-ons that encourage customers to increase their spend as their needs grow
Implement Proactive Customer Success: Use product analytics and customer health scores to identify at-risk customers before they churn. A dedicated customer success team can provide support and demonstrate ongoing value, which is key to minimizing churn and contraction
Gather and Act on Feedback: Regularly collect customer feedback through surveys (like NPS) and interviews to understand points of friction. Acting on this feedback to improve the product and customer experience directly impacts retention
Best Practices
Focus on Customer Onboarding: A personalized and effective onboarding process helps customers realize the product's value quickly, which is fundamental to long-term retention and future expansion
Drive Expansion Revenue: Proactively identify upsell and cross-sell opportunities. Structure pricing in tiers and offer valuable add-ons that encourage customers to increase their spend as their needs grow
Implement Proactive Customer Success: Use product analytics and customer health scores to identify at-risk customers before they churn. A dedicated customer success team can provide support and demonstrate ongoing value, which is key to minimizing churn and contraction
Gather and Act on Feedback: Regularly collect customer feedback through surveys (like NPS) and interviews to understand points of friction. Acting on this feedback to improve the product and customer experience directly impacts retention
FAQs
What is a good NDR rate? An NDR over 100% is considered good, as it signifies that revenue growth from existing customers is outpacing losses from logo churn and contractions. Best-in-class SaaS companies often report NDRs of 120% or higher.
What is the difference between NDR and Gross Dollar Retention (GDR)? NDR includes revenue from expansion (upsells/cross-sells/add-ons), while GDR explicitly excludes it. GDR measures pure revenue retention from the existing customer base and can never exceed 100%, whereas NDR can.
Does NDR include revenue from new customers? No. The calculation for NDR is based solely on the cohort of customers that existed at the beginning of the measurement period. Revenue from new customers is excluded to isolate the performance of the existing base.
Why is an NDR over 100% so important? It means a company's revenue would continue to grow even if it stopped acquiring new customers. This demonstrates a strong product-market fit, high customer satisfaction, and a capital-efficient growth model, all of which are highly valued by investors.
Can a company have a high NDR but also high churn? Yes, it's possible. A company could be losing a significant number of smaller customers (high logo churn) but compensating for the lost revenue through major upgrades and expansions from its larger, remaining customers. This is why it's important to analyze NDR alongside logo churn.
How does NDR relate to Customer Lifetime Value (LTV)? A higher NDR is strongly correlated with a higher LTV. When customers are retained longer and increase their spending over time (driving NDR up), their total lifetime value to the company also increases.
FAQs
What is a good NDR rate? An NDR over 100% is considered good, as it signifies that revenue growth from existing customers is outpacing losses from logo churn and contractions. Best-in-class SaaS companies often report NDRs of 120% or higher.
What is the difference between NDR and Gross Dollar Retention (GDR)? NDR includes revenue from expansion (upsells/cross-sells/add-ons), while GDR explicitly excludes it. GDR measures pure revenue retention from the existing customer base and can never exceed 100%, whereas NDR can.
Does NDR include revenue from new customers? No. The calculation for NDR is based solely on the cohort of customers that existed at the beginning of the measurement period. Revenue from new customers is excluded to isolate the performance of the existing base.
Why is an NDR over 100% so important? It means a company's revenue would continue to grow even if it stopped acquiring new customers. This demonstrates a strong product-market fit, high customer satisfaction, and a capital-efficient growth model, all of which are highly valued by investors.
Can a company have a high NDR but also high churn? Yes, it's possible. A company could be losing a significant number of smaller customers (high logo churn) but compensating for the lost revenue through major upgrades and expansions from its larger, remaining customers. This is why it's important to analyze NDR alongside logo churn.
How does NDR relate to Customer Lifetime Value (LTV)? A higher NDR is strongly correlated with a higher LTV. When customers are retained longer and increase their spending over time (driving NDR up), their total lifetime value to the company also increases.
FAQs
What is a good NDR rate? An NDR over 100% is considered good, as it signifies that revenue growth from existing customers is outpacing losses from logo churn and contractions. Best-in-class SaaS companies often report NDRs of 120% or higher.
What is the difference between NDR and Gross Dollar Retention (GDR)? NDR includes revenue from expansion (upsells/cross-sells/add-ons), while GDR explicitly excludes it. GDR measures pure revenue retention from the existing customer base and can never exceed 100%, whereas NDR can.
Does NDR include revenue from new customers? No. The calculation for NDR is based solely on the cohort of customers that existed at the beginning of the measurement period. Revenue from new customers is excluded to isolate the performance of the existing base.
Why is an NDR over 100% so important? It means a company's revenue would continue to grow even if it stopped acquiring new customers. This demonstrates a strong product-market fit, high customer satisfaction, and a capital-efficient growth model, all of which are highly valued by investors.
Can a company have a high NDR but also high churn? Yes, it's possible. A company could be losing a significant number of smaller customers (high logo churn) but compensating for the lost revenue through major upgrades and expansions from its larger, remaining customers. This is why it's important to analyze NDR alongside logo churn.
How does NDR relate to Customer Lifetime Value (LTV)? A higher NDR is strongly correlated with a higher LTV. When customers are retained longer and increase their spending over time (driving NDR up), their total lifetime value to the company also increases.
Related Metrics
Commonly mistaken for:
Gross Dollar Retention (Retained ARR/MRR excluding expansion; capped at 100%)
Logo Retention (% of customers kept, not ARR/MRR kept)
ARR Growth Rate (Growth of total ARR (includes new logos); NDR excludes new-customer ARR)
Related Metrics
Commonly mistaken for:
Gross Dollar Retention (Retained ARR/MRR excluding expansion; capped at 100%)
Logo Retention (% of customers kept, not ARR/MRR kept)
ARR Growth Rate (Growth of total ARR (includes new logos); NDR excludes new-customer ARR)
Related Metrics
Commonly mistaken for:
Gross Dollar Retention (Retained ARR/MRR excluding expansion; capped at 100%)
Logo Retention (% of customers kept, not ARR/MRR kept)
ARR Growth Rate (Growth of total ARR (includes new logos); NDR excludes new-customer ARR)
Components:
Index