Net Dollar Retention (NDR) measures revenue retained and expanded from existing customers after accounting for churn, calculated as (beginning ARR + expansion revenue – churned ARR) / beginning ARR.
Net Dollar Retention (NDR) measures the percentage of recurring revenue retained from existing customers after one year, including expansion revenue minus churn, calculated as (beginning ARR + expansion revenue – churned ARR) / beginning ARR.
NDR matters because it shows whether your base is growing or shrinking. An NDR above 100% means customers are spending more than they did a year ago (because expansion outpaces churn). Below 100% means you're losing more revenue from existing customers than you're adding. For SaaS companies, this single metric drives valuation more than almost anything else—investors know NDR predicts whether you need constant new logo hunting just to stay flat.
You'll see NDR come up on discovery calls when a prospect uses a platform that's losing money year-over-year on their existing base. If a customer closed 100 new logos last year but NDR dropped to 95%, they're now running on a treadmill: they need 5% more new business just to stay even. That's the customer's real problem, and it becomes your entry point.
On the flip side, if NDR is 120% and their new customer acquisition is slowing, you've found someone who can survive a slowdown in pipeline because their installed base is doing the work.
A concrete example: a mid-market HR SaaS company starts a year with $10M ARR. Over 12 months they add $1.2M in expansion (more seats, higher tiers from existing customers) but lose $800K to churn. Their NDR is ($10M + $1.2M – $800K) / $10M = 104%. They're in a strong position—existing customers alone are enough to grow revenue next year, so new logo acquisition becomes upside, not survival.
Compare that to an NDR of 98%: same company, but expansion is only $800K while churn stays at $800K. Now they're shrinking the base and must hunt new logos just to keep revenue flat. The business is mathematically different, even though both companies might report "steady revenue."
These terms get tangled because they live next to each other in the metrics stack.
| Term | What it measures | Includes new customers? | Your use on a call |
|---|---|---|---|
| Net Dollar Retention (NDR) | Revenue from existing customers only, after expansion and churn | No—only the base from a year ago | "Are customers spending more or less with you year-over-year?" |
| Net Revenue Retention (NRR) | Same calculation as NDR (the terms are synonymous in practice) | No—only the base | Identical to NDR; used interchangeably |
| Annual Recurring Revenue (ARR) | Total predictable revenue from all subscriptions today | Yes—includes new logos + expansion | "What's your total subscription revenue right now?" |
| Expansion Revenue | Incremental ARR from existing customers alone | No—excludes churn | "How much new revenue are you getting just by expanding existing accounts?" |
The confusion lives in the name: "Net Dollar Retention" sounds like it's about losing money, but it's actually about whether your existing base is growing. A 120% NDR is fantastic; a 98% NDR is a problem.
Most AEs assume NDR only matters for mature companies with big installed bases. That's backwards. NDR is an early warning system for whether your product actually sticks. A startup with 50 customers and 110% NDR has found product-market fit. A scale-up with 500 customers and 95% NDR has a leaky bucket no amount of new logo revenue will fix.
On discovery calls, ask about NDR early if you're selling into a SaaS business. If they don't track it, that's a yellow flag—they don't know if their existing customers are healthy. If they do track it and it's below 100%, the conversation immediately shifts: they need unit economics to improve before growth metrics look good. If it's above 105%, you're likely talking to someone who's won the expansion game and is now deciding whether to invest in new logos.
Never confuse NDR with churn rate. Churn rate tells you what fraction of customers you lost. NDR tells you what revenue you lost after you account for the customers who expanded. You can have low churn (10% of customers left) but high NDR (95%, because the big customers stayed and the small ones churned). The opposite is also true: high churn (20% of customers left) but 110% NDR (because the remaining customers more than doubled their spend).
Above 100% is healthy and shows expansion outpacing churn. Below 100% means the base is shrinking. For SaaS, 110%+ is strong, 120%+ is exceptional. Anything below 95% signals a product-market or retention problem you need to fix before scaling.
Yes. A small company with five customers spending more this year than last year has healthy NDR, even with minimal absolute revenue. NDR is about direction and unit health, not scale. It's a leading indicator of whether your product creates value customers want to pay more for.
NDR measures growth from the existing base only. Growth rate includes new customers. A company with 100% NDR and aggressive new logo hunting can still have 50% total growth. NDR tells you if the core product is working; growth tells you if you're adding fast enough to hit your targets.
Churn tells you who left. NDR tells you whether those departures mattered. You can have 5% monthly churn but 110% NDR if the big customers stay. That's a better business than 2% churn with 85% NDR, where small customers are leaving but big ones are also not expanding.
Ask: 'How much revenue are you retaining and expanding from customers acquired two years ago?' If they don't know or won't share, you've learned something. If they do share and it's below 100%, that's where your solution likely fits—improving expansion or reducing churn.
Part of our guide to Discovery calls.
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