Net Dollar Retention (NDR)
What is NDR in SaaS and Finance?
NDR stands for Net Dollar Retention. It's a metric tracks the recurring revenue you keep and grow from the set of customers over time. NDR includes expansion, contraction, and churn, and shows whether existing customers are organically driving growth or silently leaking revenue. When expansion outweighs contraction and churn, NDR climbs above 100 %, while more contraction and churn relative to expansion suggest a shrinking ARR base.
How to calculate Net Dollar Retention
To calculate NDR divide Current ARR from customers active in the period/ARR from the same costumers in the same period.
Besides this basic formula, there are other methodologies that will provide you more information with your NDR, let's get into them.
NDR Methodologies
The are three views of NDR:
- Trailling period: It captures the most recent momentum across all active customers.
- Cohorted: It follows retention as specific signup cohorts age.
- Renewal: It zeroes in on performance at the critical moment when contracts are renewed.
1. Trailing Period NDR
Trailing‑period NDR starts with all customers that had recurring revenue on the first day of the window.
Below is another example, note the customer ARR waterfall that details ARR in each quarter for each customer.
To calculate the 12-month trailing period NDR for Q2 2025, divide the sum of the ARR in Q2 2025 to 12 months prior, or Q2 2024.
You’ll notice that both CHOAM and Daedalus Tech are not included in the ARR summation for Q2 2025, as they do not have ARR at the beginning of the trailing period.
2. Cohorted NDR
Cohorted NDR groups customers by a shared start event, commonly known as contract start or go‑live date.
For each cohort, capture ARR on that baseline date, then look a fixed interval later (e.g., 12 months) and apply the same NDR formula: NDR (cohort) = (Retained ARR + Expansion ARR − Contraction ARR − Churned ARR) ÷ Retained ARR. By isolating performance within each cohort, you can see how product‑market fit, onboarding, and expansion motions improve (or degrade) over time.
In the in-depth example below, note that the customer ARR waterfall has been aligned by start quarter instead of calendar quarter. Note that the columns in the waterfall are the relative quarter for the customer, not the calendar quarter. To calculate the NDR for each cohort, divide the cohort ARR amount by the historical ARR amount to yield the cohort NDR.
For ARR from customers that started in Q1 2024 (blue) and Q2 2024 (pink), the cohorted retention is calculated for 12 months (4 quarters). For the ARR from customers that started in Q3 2024 (green), the cohorted retention is calculated for 15 months (5 quarters). Note that in the example below, the cohort baseline is set to Quarter 0, as all cohorts are compared to the Quarter 0 value, or the starting amount of ARR.
Customer Waterfall
Customer Cohorted Retention
3. Renewals NDR
Renewal NDR evaluates only the contracts that came up for renewal during the analysis window.
In the example below we show why examine all three views in tandem separates short‑term noise from long‑term health and pinpoints exactly where expansion, contraction, or churn needs attention.
Each view tells a different story: trailing period highlights recent momentum, cohorts isolate lifecycle effects, and renewal retention zooms in on commercial performance at the point of renewal.
New Business Deals
Renewal Deals
Renewals NDR
Why is NDR important as a metric?
- Valuation signal. Investors want best‑in‑class retention (> 120 %), viewing it as evidence of deep product value and pricing power.
- Compounding growth. SaaS companies with NDR > 100 % grow 1.5–3x faster than peers.
- Capital efficiency. Expansion from existing customers is far cheaper than acquiring net‑new logos, boosting payback and LTV.
What's a good Net Dollar Retention?
A good Net Dollar Retention depends on customer segment and average contract value. The benchmarks vary because expansion potential, pricing leverage, and churn dynamics differ meaningfully across segments. Here are some standard benchmarks:
- SMB customers under $5K ACV
Net Dollar Retention of 90% or higher is generally considered good.
Around 100% is strong, meaning expansion offsets churn.
110% or higher is excellent and indicates consistent upsell or seat expansion despite higher natural churn in this segment. - Mid-market customers between $5K and $50K ACV
A good Net Dollar Retention starts at 100%, showing stable renewals.
115% is strong and reflects healthy expansion motion.
125% or higher is excellent and often signals product-led expansion or effective account management. - Enterprise customers over $50K ACV
A good Net Dollar Retention typically begins at 110% due to larger expansion opportunities.
125% is strong and common among well-run enterprise SaaS companies.
140% or higher is excellent and usually reflects deep account penetration, multi-product adoption, or contract expansion over time.
In practice, Net Dollar Retention should be evaluated relative to segment economics rather than as a single universal benchmark. What is considered strong for SMB would be weak for enterprise, while enterprise-level targets are often unrealistic for lower-ACV customer bases.
Regardless of what NDR calculation methods you use, setting clear NDR targets helps you translate raw retention data into actionable goals. Benchmarks contextualize whether you’re simply maintaining revenue or turning your install base into a compounding engine of growth. NDR can vary by segment and deal size, use the ranges as guardrails when you set goals, plan budgets, and present to your board.
Tips to calculate your business' NDR
- Set a minimum trailing period. Twelve months is standard; shorter windows (1–3 months) are useful for spotting early‑warning trends in fast‑moving SMB books with shorter contracts.
- Exclude new customers. NDR focuses solely on customers present at both the start and end of the measurement window.
- Align revenue type. Choose ARR or MRR consistently across Starting, Expansion, Contraction, and Churn.
- Map movements correctly. Downgrades, seat changes, and add‑ons belong in Expansion or Contraction—not New Sales.
- Handle multi‑currency. Convert to a single currency before summing revenue movements.
What’s the difference between NDR vs GDR?
Gross Dollar Retention (GDR) looks only at how much recurring revenue is retained after churn and contractions, excluding any expansion. It answers the question of how much revenue you keep before upsells. Net Dollar Retention (NDR) includes expansion revenue from the same customers, such as upgrades, seat increases, or cross-sells, in addition to accounting for churn and downgrades.
As a result, GDR is always less than or equal to NDR and is used to assess baseline retention quality, while NDR reflects the combined impact of retention and expansion.
What’s the difference between NDR vs NRR?
None. Net Dollar Retention (NDR) and Net Revenue Retention (NRR) are commonly used interchangeably in SaaS. Both metrics measure how recurring revenue from an existing cohort of customers changes over a period, including churn, contractions, and expansion. In most SaaS reporting contexts, there is no practical difference between NDR and NRR but Some teams prefer NDR to emphasize dollar-based measurement, while others use NRR as a broader revenue retention term.
Does net retention include new customers?
No, NDR excludes revenue from new customers. They are calculated using only the revenue from customers who were active at the start of the period. New customer revenue is tracked separately through metrics like new ARR, net new ARR, or bookings. This separation allows your team to clearly distinguish growth driven by retention and expansion from growth driven by new customer acquisition.
Key Takeaways
- NDR > 100 % means your existing customers grow your business even with zero new sales.
- Cohorted and renewal views complement trailing period NDR, helping you pinpoint where retention is strong or slipping.
- Best‑in‑class SaaS companies drive NDR ≥ 120 % (mid‑market) and ≥ 130–150 % (enterprise), compounding ARR year‑over‑year.
Need more guidance? Explore more Retention metrics in our Metrics Library.
