Financial Glossary
Net Dollar Retention (NDR)
Net Dollar Retention (NDR) measures the percentage of recurring revenue retained from an existing customer cohort over a period -- typically 12 months -- after accounting for expansion (upsells, seat additions, usage growth), contraction (downgrades, partial cancellations), and full churn. The formula is: NDR = (Starting MRR + Expansion MRR - Contraction MRR - Churned MRR) divided by Starting MRR, expressed as a percentage. An NDR above 100% means existing customers are collectively spending more than they were at the start of the period, so the business grows revenue even with zero new customer acquisition. Best-in-class SaaS companies often target NDR of 120% or higher.
Problem & Application
A SaaS company starts a quarter with $500,000 in monthly recurring revenue from its existing customer base. During the quarter: customers upgrade or expand for $60,000 in additional MRR; some downgrade, reducing MRR by $20,000; and $15,000 in MRR churns entirely. NDR = ($500,000 + $60,000 - $20,000 - $15,000) / $500,000 = $525,000 / $500,000 = 105%. That means the existing customer base grows revenue 5% without any new logos. When advising a SaaS founder, a fractional CFO uses NDR to distinguish between a retention problem and a new-sales problem: if NDR is 90% but growth looks flat, the sales team is running to stand still, refilling a leaky bucket. Improving NDR by 10 points can be more valuable than increasing new ARR by 20%, because retained revenue compounds. For subscription-based campground software or marina management platforms, NDR tracks whether property operators are using more features or fewer over time.
In Short
NDR is a crucial metric for SaaS and subscription-based businesses, as it directly reflects customer satisfaction and revenue growth from the existing customer base.
How it works
Because NDR is measured on a fixed cohort, new logos acquired during the period are deliberately excluded -- the metric isolates whether the dollars you already had are growing or shrinking on their own. This makes it the clearest single read on product stickiness and pricing power, which is why investors weight it heavily when valuing recurring-revenue businesses. The most common misunderstanding is conflating NDR with gross revenue retention (GRR): GRR strips out expansion and therefore can never exceed 100%, so a healthy-looking NDR can mask serious churn that only GRR exposes -- which is why the two should always be read together.
Worked Example: NDR for a Campground Reservation Software Provider
A SaaS vendor sells reservation and dynamic-pricing software to RV parks and campgrounds on annual recurring contracts. On January 1 its existing-customer base generates $80,000 in MRR. Over the next 12 months: parks add seats, online-booking modules, and payment processing for $14,000 in expansion MRR; a few downgrade to a cheaper tier during the slow winter season, cutting $4,000 in contraction; and two parks that sold to new owners cancel entirely, churning $6,000. NDR = ($80,000 + $14,000 - $4,000 - $6,000) / $80,000 = $84,000 / $80,000 = 105%. The base grew 5% with zero new parks signed. Notice the churn is real -- a fractional CFO would also run GRR = ($80,000 - $4,000 - $6,000) / $80,000 = 87.5%, revealing that strong expansion is papering over a 12.5% annual leak that needs attention before the next fundraise.
Frequently asked
What is the difference between NDR and gross revenue retention (GRR)?
NDR includes expansion revenue (upsells, seat additions, usage growth), so it can exceed 100%. GRR excludes all expansion and counts only contraction and churn, so it is capped at 100%. NDR shows net growth from your base; GRR shows your retention floor. Read both together -- high NDR can hide churn that only GRR exposes.
Is NDR the same as net revenue retention (NRR)?
Yes, in practice. Net dollar retention (NDR), net revenue retention (NRR), and dollar-based net retention rate (DBNRR) are used interchangeably and share the same formula. The only technical distinction is that "dollar" retention may imply converting multi-currency revenue into US dollars first. The metric and its interpretation are otherwise identical.
What is a good NDR benchmark?
Above 100% means your existing base is growing without new customers, which is the threshold for healthy. Best-in-class SaaS companies often reach 120% or higher, driven by strong expansion. Anything below 100% signals net shrinkage in your base, meaning new-customer acquisition must offset the loss just to stay flat. Benchmarks vary by segment and contract size.