What is Net Dollar Retention?
Net Dollar Retention (NDR) is a key performance metric for subscription-based businesses, particularly in the SaaS (Software as a Service) industry. It measures the percentage of recurring revenue retained from existing customers over a specific period, accounting for expansions, contractions, and churn. NDR provides a comprehensive view of customer revenue health and is crucial for assessing growth potential and customer satisfaction.
To calculate NDR, businesses follow these steps:
Start with the total recurring revenue from existing customers at the beginning of the period. Add any revenue gained from upsells, cross-sells, or expansions within the customer base. Subtract revenue lost due to downgrades, contractions, or customer churn. Divide the result by the total recurring revenue at the beginning of the period and multiply by 100 to get the percentage.
An NDR of over 100% indicates that the business is expanding revenue from its existing customer base, even after accounting for churn. This is a positive sign of growth and customer satisfaction. Conversely, an NDR below 100% suggests that the company is losing more revenue than it is gaining from its existing customers, which could indicate issues with customer retention or product value.
Tracking NDR helps businesses identify trends in customer behavior and the effectiveness of their retention strategies. By focusing on increasing upsells and reducing churn, companies can improve their NDR and drive sustainable growth.
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Why Solvimon
Helping businesses reach the next level
The Solvimon platform is extremely flexible allowing us to bill the most tailored enterprise deals automatically.
Ciaran O'Kane
Head of Finance
Solvimon is not only building the most flexible billing platform in the space but also a truly global platform.
Juan Pablo Ortega
CEO
I was skeptical if there was any solution out there that could relieve the team from an eternity of manual billing. Solvimon impressed me with their flexibility and user-friendliness.
János Mátyásfalvi
CFO
Working with Solvimon is a different experience than working with other vendors. Not only because of the product they offer, but also because of their very senior team that knows what they are talking about.
Steven Burgemeister
Product Lead, Billing