Net Dollar Retention (NDR)
The percentage of recurring revenue retained and expanded from an existing customer cohort over a year, including upgrades and churn.
Net dollar retention (also called net revenue retention) measures how a cohort of existing customers' revenue changes over a trailing 12-month period, accounting for expansion (upsells, seat growth), contraction (downgrades), and churn (cancellations) — but excluding any revenue from brand-new customers. It's expressed as a percentage: above 100% means the existing customer base is growing revenue even before counting new logos.
NDR is one of the most closely watched metrics for B2B SaaS companies because it isolates the health of the existing customer relationship from new customer acquisition — a company can post strong headline growth driven entirely by new logos while its existing base is quietly shrinking, and NDR is what surfaces that.
NDR answers the question investors really ask about a subscription business: does the product get stickier and more valuable over time, or does the company have to win new customers just to stand still? A company at 120% NDR grows 20% a year from its existing base before a single new sale; a company at 90% has to replace a tenth of its revenue every year just to stay flat.
Pair NDR with gross revenue retention and logo churn. NDR above 100% can mask heavy churn if a few large accounts expand aggressively; gross retention, which only subtracts downgrades and cancellations and can't exceed 100%, shows whether the base is actually holding.
Usage-based and seat-based pricing tend to lift NDR because revenue expands automatically as customers use more or hire more, without anyone selling an upgrade. NDR also tends to drift down as a company scales and expansion within accounts saturates, so investors watch for sudden drops more than gradual ones.
NDR = (starting ARR + expansion - contraction - churn) / starting ARR, over a trailing 12-month periodA cohort starts the year with $10M in ARR. Over the year, they add $2.5M from expansion, lose $500K to downgrades, and lose $1M to churn. NDR = ($10M + $2.5M - $500K - $1M) / $10M = 110%.
NDR above 110% is considered excellent and typically signals a strong product with real expansion motion (seats, usage, upsells); below 90% is a serious red flag that investors will dig into hard, regardless of how fast total revenue is growing from new customers.
What's considered a good net dollar retention rate?
Above 100% is healthy, above 110-120% is considered excellent for B2B SaaS, and top-tier companies (often usage-based or seat-expansion models) can post NDR well above 130%.
Does NDR include new customers?
No — NDR specifically isolates the existing customer cohort from a starting point in time, tracking only expansion, contraction, and churn within that fixed group, excluding any revenue from customers acquired after that starting point.
What's the difference between net dollar retention and gross revenue retention?
Gross revenue retention subtracts only contraction and churn from the starting base, so it can't exceed 100%. Net dollar retention also adds expansion, so it can. Using the same cohort that starts at $10M and adds $2.5M of expansion while losing $1.5M to downgrades and churn, NDR is 110% but gross retention is 85%.
Can NDR stay above 100% forever?
It can stay above 100% for years at strong companies, but it usually compresses as the company scales and expansion opportunities saturate.
Why do usage-based companies often post higher NDR?
Because revenue grows automatically with customer usage, without a separate upsell motion. Seat-based models work similarly as customers hire.
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