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

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.

Related Topics

• Trend Analysis of Financial Statements
• Common-Size Analysis (Vertical Analysis) of Financial Statements
• Common-Size Financial Statement
• Net Dollar Retention
• Horizontal Analysis
• Per Share Basis
• Profitability Ratios
• Gross Margin Ratio
• Profit Margin
• After Tax Profit Margin
• Return on Assets
• Total Shareholder Return
• Cash on Cash Return
• Earnings Per Share
• Diluted Earnings Per Share
• Asset Turnover Ratio
• Berry Ratio
• Break-Even Analysis
• Liquidity Ratio
• Current ratio  (Working Capital Ratio)
• Working Ratio
• Quick Ratio
• Quick Assets
• Days Sales Outstanding
• Cash Ratio (Operating Cash Flow Ratio)
• Receivables turnover ratio (often converted to average collection period)
• Accounts Payable Turnover Ratio
• Inventory turnover ratio (often converted to average sale period)
• Solvency (Coverage Ratios)
• Leverage Ratio (Debt Ratio)
• Asset Coverage Ratio
• Debt to Equity
• Debt to Income Ratio
• Debt Coverage Ratio
• Times Interest Earned
• Market Capitalization
• Price to Equity Ratio
• Book-To-Market Ratio
• Price to Earnings Ratio
• Price to Earnings Growth (PEG) Ratio
• Price to Earnings Growth Payback Ratio
• CAPE Ratio
• Price to Cash Flow Ratio
• Capital Maintenance
• Book to Bill Ratio
• Asset Turnover Ratio
• Plowback Ratio 
• Days Inventory Outstanding
• Days Payable Outstanding
• Days Sales Outstanding
• Non-financial Performance Measures: The Balance Scorecard