Net dollar retention, or NDR, measures how recurring revenue from an existing customer group changes over a set period after including expansion, contraction, and churn. It is commonly used in subscription businesses to show whether the revenue base from current customers is growing, staying stable, or shrinking.
What Net Dollar Retention Shows
This metric focuses only on customers who were already active at the starting point of the measurement period. It does not include revenue from newly acquired customers. Because of that, net dollar retention helps clarify how much a company is expanding revenue within its installed base versus losing revenue through downgrades or customer departures.
Why It Matters in SaaS
In SaaS and other recurring revenue models, net dollar retention is often watched as a signal of customer quality, pricing strength, and product adoption over time. It is closely related to how investors think about recurring revenue performance, especially when reviewing metrics such as annual recurring revenue in subscription-based businesses.
How to Read the Metric
An NDR above 100% means expansion revenue from existing customers more than offset losses from downgrades and churn. An NDR of 100% means the existing revenue base stayed flat. An NDR below 100% means the customer cohort generated less recurring revenue than it did at the start of the period.
Limits of Net Dollar Retention
Net dollar retention is useful, but it should be read in context. It does not show how much new business a company is winning, and it can look strong even when total growth slows if performance is being driven by a narrower customer base. For that reason, it is usually treated as one recurring revenue indicator rather than a full picture of business quality on its own.
FAQ
Is net dollar retention the same as customer retention?
No. Customer retention tracks whether customers stay, while net dollar retention tracks how recurring revenue from an existing customer cohort changes over time.
What does net dollar retention above 100% mean?
It means expansion revenue from existing customers was greater than the revenue lost from downgrades and churn during the measurement period.
Does net dollar retention include new customers?
No. It looks only at revenue from customers who were already in the starting cohort.