Definition
Net Dollar Retention (NDR), also known as Net Revenue Retention (NRR), measures how much revenue you retain from existing customers over a period, after accounting for expansions, contractions, and churn. It’s one of the clearest indicators of product value, customer satisfaction, and long-term revenue durability.
Put simply, NDR answers: “If we didn’t add a single new customer this quarter, how much would our existing base grow (or shrink)?”
How to calculate NDR
NDR=Starting MRR/ARR+Expansion–Contraction–Churn/Starting MRR/ARR X 100
Where,
- Starting MRR/ARR = Monthly or Annual Recurring Revenue from the existing customer base at the beginning of the period.
- Expansion = Upsells, cross-sells, seat increases.
- Contraction = Seat decreases, downgrade in plan.
- Churn = Revenue lost from customers who left entirely.
Why NDR matters
- Signals product stickiness: High NDR = customers stay, grow, and upgrade.
- Affects valuation multiples: Investors favour companies with high NDR because they grow efficiently from their base.
- Reduces CAC pressure: When expansion drives growth, you’re less dependent on new logo acquisition.
Final takeaway
Net Dollar Retention is a mirror to your post-sale reality. Strong NDR means your product is essential, your support is responsive, and your customers are growing with you. Weak NDR? It’s time to listen harder, serve better, and re-align value delivery.
