Net dollar retention is the most-watched single metric in modern SaaS investing. It captures the full picture of how revenue from an existing customer cohort evolves over a period — accounting for churn, downgrades, and expansion all at once. When NDR exceeds 100%, the business is growing on its existing customer base alone, before any new acquisition.
The formula
NDR = (Starting MRR − Churned MRR − Downgrade MRR + Expansion MRR) ÷ Starting MRR × 100
Note: Revenue from new customers acquired during the period is not in this formula. NDR is a measure of what the starting cohort did, not what the business grew to overall.
Worked example
You start the period with $100,000 MRR from existing customers. During the period:
- Existing customers churn $5,000 MRR.
- Existing customers downgrade $2,000 MRR.
- Existing customers expand (upsell, pack increase, new add-ons) $15,000 MRR.
NDR = ($100,000 − $5,000 − $2,000 + $15,000) ÷ $100,000 = 108%.
Even with 7% gross churn, the existing customer base is producing 8% more revenue than at the start of the period — purely through expansion.
Why NDR over 100% is the holy grail
NDR over 100% means the business compounds on its existing customer base alone. New customer acquisition becomes growth on top of growth, rather than just replacing churn. Public SaaS companies with NDR in the 120-140% range routinely trade at premium multiples; those below 100% face significant valuation pressure regardless of top-line growth.
Read it together with GRR
NDR alone can hide a churn problem if expansion is strong. A 130% NDR with 80% GRR is expansion-dependent and brittle. A 110% NDR with 95% GRR is durable. Investors increasingly require both metrics — and so should operators. See gross dollar retention and GDR vs NDR.