Net Dollar Retention - Explained
What is Net Dollar Retention?
Written by Jason Gordon
Updated at September 16th, 2021
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What is Net Dollar Retention?
Net dollar retention (or net revenue retention) is a metric used to measure a company's year-over-year performance. It compares the amount of revenue that a company brings in a given year from the previous year's existing clients. It does not factor in revenue from clients acquired in the present year.
Net Dollar Retention = Revenue from Last Year' Existing Clients
Back to: ACCOUNTING, TAX, & REPORTING
How is Net Revenue Retention Used?
This metric is commonly used by Software-as-a-Service (SAAS) companies that require high levels of customer retention. In a SAAS company with a paid subscription model, Net Dollar Retention would include: Revenue Renewal Amount plus Revenue from Upselling or Cross-selling to existing customers minus Churned Revenue (revenue lost when existing customers do not come back). High net dollar retention is a strong sign for a growth-based company, as achieving a high percentage growth year over year is difficult when the level of churn (lost customers) is high. Of course, upselling or cross-selling to existing customers alleviates the impact of this negative metric.