Net Dollar Retention (NDR)

Net Dollar Retention (NDR) is a key metric used by SaaS (Software as a Service) companies and subscription-based businesses to measure revenue growth or contraction from existing customers over a specific period. Unlike gross retention, which only focuses on how much revenue is retained, NDR accounts for revenue losses (like churn and downgrades) and revenue gains (like expansions and upsells) from existing customers.

The formula for calculating Net Dollar Retention (NDR) is:

NDR = (Revenue at End of Period - Churned Revenue + Expansion Revenue) / Revenue at Start of Period x 100

A NDR greater than 100% indicates that the company is successfully upselling or expanding its existing customer base, resulting in revenue growth from existing customers even if there’s some churn. A NDR less than 100% signifies that churn and downgrades are outpacing any expansion, which might indicate customer dissatisfaction or market challenges.