Gross dollar retention and net dollar retention are the most commonly confused pair in subscription metrics - and the most important pair to read together. Each tells you something the other hides; relying on either alone produces a misleading picture of customer-base health.
The two formulas
- GDR = (Starting MRR − Churned MRR − Downgrade MRR) ÷ Starting MRR. Excludes expansion. Caps at 100%.
- NDR = (Starting MRR − Churned MRR − Downgrade MRR + Expansion MRR) ÷ Starting MRR. Includes expansion. Can exceed 100%.
Worked example
You start the period with $100,000 MRR. Existing customers churn $5,000, downgrade $2,000, and expand $15,000. New customers do not count.
- GDR = ($100,000 − $5,000 − $2,000) ÷ $100,000 = 93%.
- NDR = ($100,000 − $5,000 − $2,000 + $15,000) ÷ $100,000 = 108%.
NDR looks great. GDR shows the underlying base is leaking 7% per period.
Why both matter
NDR alone can hide a retention problem if expansion is strong. A 110% NDR sounds healthy, but if it comes from 85% GDR plus 25% expansion, the customer base is eroding and only aggressive upsell is masking it. The combination tells the real story: high NDR with high GDR is real retention; high NDR with mediocre GDR is expansion-dependent and risky.
Best-in-class targets
- SaaS: GDR 92-95%, NDR 110-130%.
- Shopify subscriptions: The metrics are less standardly reported, but applied: GDR 85-95% monthly, NDR slightly higher if there is meaningful upsell or pack-size expansion.
- Investor benchmark: Public SaaS valuations correlate more strongly with NDR than any other single metric - but only when GDR is also strong.