Net Dollar Retention (NDR) – also known as Net Revenue Retention (NRR) – is a core financial metric in SaaS that measures how much recurring revenue a company retains from its existing customer base over a defined time period. It takes into account revenue gained from expansions (e.g., upsells, add-ons), revenue lost from contractions (e.g., downgrades), and customer churn (cancellations).
This metric reflects the net effect of your existing customers on your recurring revenue without considering any new customer acquisitions.
“If your NDR is above 100%, your SaaS business is growing even without acquiring a single new customer.”
Why Net Dollar Retention (NDR) Matters
NDR is more than a retention metric. It’s a comprehensive indicator of:
- Product-market fit: Growing customers are happy customers.
- Expansion efficiency: Reveals your upsell and cross-sell effectiveness.
- Customer health: Highlights whether your product is sticky.
- Predictable revenue growth: Enables forecasting and long-term planning.
- SaaS valuation: Higher NDR correlates directly with better investor sentiment.
In essence, NDR is the single most powerful indicator of sustainable SaaS growth.
NDR Formula
NDR=Starting MRR+Expansion MRR−Contraction MRR−Churned MRRStarting MRR×100%\text{NDR} = \frac{\text{Starting MRR} + \text{Expansion MRR} – \text{Contraction MRR} – \text{Churned MRR}}{\text{Starting MRR}} \times 100\%
Components:
- Starting MRR: Monthly Recurring Revenue from all existing customers at the beginning of the period.
- Expansion MRR: Additional revenue from those customers (upsells, add-ons, seat expansions).
- Contraction MRR: Revenue lost due to downgrades or reduced usage.
- Churned MRR: Revenue lost from customers who fully cancel.
Example 1: SMB-Focused SaaS Company
- Starting MRR: $100,000
- Expansion MRR: $25,000
- Contraction MRR: $5,000
- Churned MRR: $10,000
NDR=100,000+25,000−5,000−10,000100,000=110%\text{NDR} = \frac{100,000 + 25,000 – 5,000 – 10,000}{100,000} = 110\%
➡ NDR = 110%: The company is growing by 10% from its existing customer base — even without adding new customers.
Example 2: Usage-Based SaaS Company
- Starting MRR: $50,000
- Expansion MRR: $20,000 (due to higher usage)
- Contraction MRR: $2,000
- Churned MRR: $8,000
NDR=50,000+20,000−2,000−8,00050,000=120%\text{NDR} = \frac{50,000 + 20,000 – 2,000 – 8,000}{50,000} = 120\%
➡ NDR = 120%: Strong usage-based expansion, common among PLG SaaS companies like Snowflake, Datadog, or Twilio.
NDR Benchmarks by SaaS Segment
| Company Type | NDR Benchmark |
|---|---|
| SMB SaaS | 90–100% |
| Mid-Market SaaS | 100–110% |
| Enterprise SaaS | 110–130%+ |
| Usage-Based/PLG SaaS | 130–160%+ |
Snowflake (as of recent public filings): NDR over 170%.
NDR vs. Gross Revenue Retention (GRR)
| Metric | Includes Expansions? | Reflects Growth? | Best For |
|---|---|---|---|
| NDR | ✅ Yes | ✅ Yes | Growth Planning |
| GRR | ❌ No | ❌ No | Churn Analysis |
If GRR is 80% and NDR is 120%, you’re losing some customers – but more than making up for it through upsells and expansions.
Why Investors Obsess Over NDR
- LTV Growth: NDR directly boosts customer lifetime value.
- Lower CAC Pressure: You don’t have to acquire aggressively to grow.
- Capital Efficiency: More revenue from the same customers = lower burn.
- Valuation Leverage: Companies with NDR > 120% often trade at higher revenue multiples.
SaaS companies with NDR > 120% can still grow rapidly without burning money on acquisition.
How NDR Shapes Your GTM Strategy
- Product Teams: Focus on features that drive deeper engagement and upsell potential.
- Customer Success: Proactively identify upsell or churn risk based on product usage.
- Revenue Operations: Segment customers by NDR trends and allocate resources accordingly.
- Sales: Prioritize expansion and cross-sell playbooks over new logo hunting.
Common Mistakes in NDR Calculation
Including One-Time or Non-Recurring Revenue
NDR should include recurring revenue only – exclude onboarding, service fees, or one-off purchases.
Ignoring Downgrades
Contractions matter just as much as churn – they eat into your expansion gains.
Mixing New Customer Revenue
NDR is a same-customer metric. Do not include new customers in the numerator.
Currency Effects
For global SaaS, normalize MRR values to a constant currency to avoid FX distortion.
Tools to Track NDR
- ChartMogul: Real-time NDR dashboards and segmentation
- ProfitWell: Churn and expansion analytics for SaaS
- Baremetrics: NDR trend lines and MRR components
- Salesforce Revenue Cloud: For enterprise teams
- Looker / Tableau / Power BI: Custom visualizations for advanced ops teams
SaaS Companies with Exceptional NDR
| Company | NDR (Approx.) | Business Model |
|---|---|---|
| Snowflake | 170%+ | Usage-based PLG |
| Twilio | 155% | API-driven comms |
| Datadog | 130% | Developer/Infra monitoring |
| Slack | 125%+ (pre-acq) | Messaging + PLG |
These companies drive upsells via team expansion, usage scaling, and product stickiness – not aggressive outbound sales.
How to Improve NDR
- Strengthen Customer Success
- Track user behavior to detect early churn signals.
- Run health scores, automate alerts, and create QBRs (Quarterly Business Reviews).
- Build an Expansion Playbook
- Identify expansion triggers: # of seats, API usage, storage limits.
- Use pricing tiers and bundles to enable upsells.
- Improve Time to Value (TTV)
- Optimize onboarding.
- Reduce friction to hit “aha” moments faster.
- Introduce Usage-Based Pricing
- Allows high-value users to pay more without friction.
- Nurture Champions
- Encourage internal evangelists to bring in other teams.
- Analyze Churn and Contraction
- Conduct exit surveys.
- Look for patterns across industries, regions, use cases.
Advanced Metrics Related to NDR
- GRR (Gross Revenue Retention): Tracks retention without upsells.
- Net Retention Cohorts: NDR for users acquired by month/quarter.
- Customer Health Score: Predicts expansion vs. churn.
- LTV/CAC Ratio: Determines how customer value compares to acquisition cost.
- Expansion MRR %: Expansion as a % of total recurring revenue.
FAQs
Q1: Can I have a high NDR but poor churn?
A: Yes. If your expansions outweigh your churn/contractions, NDR remains high – but it hides retention risk. Use GRR to get the full picture.
Q2: Does NDR apply to freemium users?
A: Only after they become paying customers. NDR tracks paid revenue only.
Q3: What causes a low NDR?
A: Lack of upsell opportunities, limited product depth, poor onboarding, weak CS coverage, or high competition.
Q4: How often should I track NDR?
A: Monthly for fast-growth startups; quarterly for mature SaaS.
Q5: What’s a healthy NDR for Series A/B SaaS?
A: 100–115%. For PLG or usage-based SaaS, aim for 120%+.
Final Takeaway
Net Dollar Retention is the heartbeat of your SaaS revenue engine. It tells the story of your product’s value, your team’s ability to nurture and expand accounts, and your company’s long-term health – all in one number.
“You can’t build a unicorn on new logos alone. Growth comes from the inside out – and NDR is your north star.”