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Net dollar retention (NDR), also called net revenue retention (NRR), measures the percentage of your revenue that you’re able to maintain from existing customers, inclusive of expansion revenue. Software as a service (SaaS) companies often track and report NDR because it can offer insight into revenue growth and customer satisfaction.
You can calculate NDR by taking your monthly recurring revenue (MRR) at the start of the month, subtracting churn and downgrades, and adding expansion. Then, divide the result by the MRR. Multiply the result by 100 if you want the percentage. Additionally, you can use annual recurring revenue (ARR) instead of MRR to find your annual NDR.
Your NDR can help you understand your business’s ability to grow. Many successful SaaS companies have an NDR that’s over 100%. Meaning they can more than cover the losses from downgrades and churn with add-ons, upselling, and cross-selling, and the business could grow even if it doesn’t attract new customers.
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