Net Dollar Retention

The percentage of revenue retained from existing customers over time.

QUICK ANSWER

Net Dollar Retention measures how much revenue a business retains from existing customers, including expansion, churn, and downgrades. A value above 100% means the company is growing revenue without acquiring new customers.

In depth

Net Dollar Retention is calculated as (Starting Revenue + Expansion – Churn – Contraction) divided by Starting Revenue. It captures the net effect of customer activity over time, including upgrades, downgrades, and cancellations. NDR is a critical SaaS metric because it reflects product value, pricing power, and customer satisfaction. A high NDR indicates that revenue from existing customers is growing faster than it is shrinking, reducing dependence on new customer acquisition. Investors closely monitor NDR as it signals strong retention, efficient growth, and the potential for long-term scalability.

Example

Let’s consider a real-world example of a SaaS startup analyzing revenue from existing customers.

At the beginning of the month:

Starting MRR: $150,000

During the month:
Expansion (upgrades): +$50,000
Churn (lost customers): –$20,000
Contraction (downgrades): –$10,000

Calculate NDR:

NDR = (150K + 50K – 20K – 10K) ÷ 150K
NDR = 170K ÷ 150K = 113%

This means the startup grew revenue from its existing customers by 13%.