Net Dollar Retention
What is Net Dollar Retention?
Net Dollar Retention (NDR) is a SaaS metric that measures the percentage of recurring revenue retained from existing customers over a specific period, accounting for upgrades, downgrades, and churn. An NDR above 100% indicates that revenue expansion from existing customers exceeds revenue lost to churn and contraction.
Net Dollar Retention has become the gold standard metric for measuring SaaS business health and growth efficiency. Unlike gross retention metrics that only track losses, NDR captures the complete picture of customer revenue dynamics—revealing whether your existing customer base is growing or shrinking in value over time. For B2B SaaS companies, strong NDR (typically 110-130% for best-in-class companies) demonstrates product-market fit, effective customer success operations, and capital-efficient growth potential. The metric gained prominence as investors recognized that companies with high NDR could achieve sustainable growth with lower customer acquisition costs, as existing customers naturally expand their spending through upsells, cross-sells, and increased usage.
Key Takeaways
Revenue expansion indicator: NDR above 100% means existing customers are generating more revenue than you're losing to churn and downgrades
Growth efficiency metric: High NDR (120%+) enables profitable growth with lower dependency on new customer acquisition
Investor benchmark: Public SaaS companies typically target 110-130% NDR, with 120%+ considered best-in-class
Customer success KPI: NDR directly reflects the effectiveness of onboarding, adoption, expansion, and retention programs
Excludes new customers: Calculation focuses exclusively on cohort revenue changes, isolating existing customer performance
How It Works
Net Dollar Retention tracks a cohort of customers from a starting period and measures the revenue changes within that cohort over a subsequent period (typically quarterly or annually). The calculation begins with the Annual Recurring Revenue (ARR) from existing customers at the period start. Throughout the measurement period, this base revenue changes through four mechanisms: expansion revenue from upgrades and increased usage, contraction revenue from downgrades, churned revenue from cancelled customers, and reactivation revenue from previously churned customers who return.
The formula excludes any revenue from new customers acquired during the measurement period, ensuring the metric purely reflects your ability to retain and expand existing customer relationships. For example, if you start a quarter with $1M in ARR from 100 customers, lose $50K to churn, lose $30K to downgrades, but gain $300K in expansion revenue, your NDR would be 122% [($1M - $50K - $30K + $300K) / $1M × 100].
This cohort-based approach allows SaaS companies to separate growth from existing customers versus growth from new logo acquisition. When NDR exceeds 100%, the company demonstrates negative net churn—a powerful indicator that the product delivers increasing value over time and that Customer Success teams effectively drive adoption and expansion.
Key Features
Cohort-based measurement: Tracks a defined group of customers over time without including new acquisitions
Comprehensive revenue tracking: Captures all revenue changes including expansion, contraction, and churn
Growth efficiency indicator: High NDR reduces dependency on expensive new customer acquisition
Predictable revenue metric: Strong NDR provides visibility into baseline revenue growth from existing customers
Customer health barometer: Reflects product value delivery, customer satisfaction, and success program effectiveness
Use Cases
SaaS Growth Planning and Forecasting
Finance and revenue operations teams use NDR to build more accurate ARR forecasts and growth models. By understanding historical NDR trends, companies can project baseline revenue growth from their existing customer base before factoring in new customer acquisition. A company with 120% NDR can confidently forecast 20% growth from existing customers, allowing more strategic decisions about sales and marketing investment levels needed to achieve overall growth targets.
Customer Success Program Optimization
Customer success leaders track NDR alongside segment-specific metrics to identify which customer cohorts, industries, or product tiers drive the strongest expansion. By analyzing NDR by customer segment, teams can prioritize resources toward high-potential accounts, refine onboarding programs, and develop targeted expansion playbooks. For instance, if enterprise customers show 140% NDR while mid-market shows 95%, the team might investigate what drives enterprise expansion success and apply those learnings to improve mid-market performance.
Investor Relations and Valuation
Public SaaS companies report NDR in earnings calls and investor presentations as a key metric demonstrating business quality and growth sustainability. According to research from Bessemer Venture Partners, public cloud companies with NDR above 120% typically command premium valuations, as high NDR indicates strong competitive moats, product stickiness, and efficient growth potential. Private companies seeking venture funding or preparing for exit also track NDR closely, as it's become a standard due diligence metric for software investors.
Implementation Example
Here's a comprehensive NDR tracking dashboard structure with quarterly cohort analysis:
NDR Calculation Framework
NDR Tracking Dashboard
Metric | Q1 | Q2 | Q3 | Q4 | Target |
|---|---|---|---|---|---|
Net Dollar Retention | 112% | 108% | 115% | 118% | >110% |
Starting Cohort ARR | $4.2M | $5.0M | $5.4M | $6.1M | - |
Expansion Rate | 18% | 15% | 17% | 19% | >15% |
Contraction Rate | 3% | 3% | 2% | 2% | <3% |
Churn Rate | 3% | 4% | 3% | 3% | <5% |
Net Expansion | 12% | 8% | 12% | 14% | >10% |
Segment-Level NDR Analysis
Customer Segment | ARR Cohort | NDR | Customers | Avg Expansion |
|---|---|---|---|---|
Enterprise (>$100K) | $2.5M | 135% | 20 | $43,750 |
Mid-Market ($25K-$100K) | $1.8M | 105% | 45 | $2,000 |
SMB (<$25K) | $700K | 92% | 135 | -$415 |
This dashboard structure enables executive teams to monitor overall NDR health while drilling into the underlying drivers. The segment analysis reveals that enterprise customers drive strong expansion while SMB customers show net contraction, informing strategic decisions about resource allocation, product roadmap priorities, and ideal customer profile refinement.
Related Terms
Annual Recurring Revenue (ARR): The foundation metric used in NDR calculations, measuring yearly recurring revenue
Gross Revenue Retention (GRR): Sister metric to NDR that measures retention without including expansion revenue
Customer Lifetime Value (LTV): Long-term revenue projection that benefits from high NDR through extended customer value
Churn Rate: Component of NDR measuring the percentage of customers or revenue lost
Expansion Revenue: The growth component of NDR from upsells, cross-sells, and increased usage
Customer Health Score: Leading indicator metric that helps predict and improve future NDR performance
Customer Success: The operational function primarily responsible for driving strong NDR outcomes
Frequently Asked Questions
What is Net Dollar Retention?
Quick Answer: Net Dollar Retention measures the percentage of recurring revenue retained from existing customers over time, including expansion, downgrades, and churn, with above 100% indicating revenue growth from the existing customer base.
Net Dollar Retention is calculated by taking a cohort of customers from a starting period, tracking all revenue changes (expansion, contraction, and churn) within that cohort, and expressing the ending revenue as a percentage of the starting revenue. The metric excludes new customer revenue to isolate performance with existing accounts.
What's the difference between Net Dollar Retention and Gross Revenue Retention?
Quick Answer: Net Dollar Retention includes expansion revenue from upsells and cross-sells and can exceed 100%, while Gross Revenue Retention only measures revenue retained without expansion and is capped at 100%.
Gross Revenue Retention (GRR) measures what percentage of revenue you keep from existing customers, ignoring any expansion. If you start with $1M and lose $100K to churn and downgrades but gain $300K in expansion, your GRR would be 90% ($900K retained / $1M) while your NDR would be 120% ($1.2M ending / $1M starting). GRR shows how "leaky" your bucket is, while NDR shows net growth or contraction.
What is a good Net Dollar Retention rate for SaaS companies?
Quick Answer: Best-in-class SaaS companies target 120%+ NDR, with 110-130% considered strong and anything above 100% indicating net revenue expansion from existing customers.
According to KeyBanc's SaaS survey, median public SaaS company NDR ranges from 105-115%, while top performers achieve 120-140% or higher. The target varies by business model—product-led growth companies with usage-based pricing often see higher NDR (130%+), while enterprise software with fixed contracts may target 110-120%. Below 100% indicates you're losing more revenue to churn and contraction than you're gaining from expansion, requiring higher new customer acquisition to grow.
How do you calculate Net Dollar Retention?
The formula is: NDR = (Starting ARR + Expansion - Contraction - Churn) / Starting ARR × 100. Start with the ARR from a cohort of existing customers at the beginning of the period, add expansion revenue (upsells, cross-sells, usage increases), subtract contraction revenue (downgrades, seat reductions), subtract churned revenue (cancelled customers), and divide by the starting ARR. Exclude all revenue from new customers acquired during the measurement period.
How can companies improve their Net Dollar Retention?
Improving NDR requires a multi-pronged approach across the customer lifecycle. Focus on strong onboarding programs to drive time-to-value and product adoption, implement proactive Customer Success strategies with regular business reviews and health monitoring, develop clear expansion paths through product tiers and add-on modules, reduce churn through early warning systems and intervention playbooks, and align product development with customer needs to increase usage-driven expansion. Companies can also use signal intelligence platforms like Saber to identify expansion opportunities and at-risk accounts earlier through company and contact signals.
Conclusion
Net Dollar Retention has emerged as the definitive metric for measuring SaaS business health and growth efficiency. Unlike vanity metrics focused solely on new customer acquisition, NDR reveals the true quality of your customer relationships and product-market fit. When existing customers consistently expand their spending, it demonstrates that your product delivers ongoing value and that your Customer Success organization effectively nurtures and grows accounts.
For go-to-market teams, NDR provides critical insights across functions. Marketing and sales teams can optimize customer acquisition strategies knowing the baseline growth from existing customers. Customer success teams can quantify their impact on revenue outcomes and identify which programs drive the strongest expansion. Finance and operations teams can build more accurate forecasts and assess capital efficiency. Product teams can validate roadmap decisions by correlating feature adoption with NDR improvements.
As the SaaS industry matures and customer acquisition costs rise, Net Dollar Retention will only grow in strategic importance. Companies that master the art and science of revenue retention and expansion—through exceptional products, proactive customer success, and data-driven expansion strategies—will achieve more sustainable, profitable growth than competitors who rely primarily on new logo acquisition.
Last Updated: January 18, 2026
