NDR is a metric, expressed as a percentage. It illustrates the (changed) revenue of current users that a company can retain compared to another period, taking into account downgrades, upgrades, and churn.
(Starting MRR + expansion – downgrades – churn)/ Starting MRR *100 = NDR
NDR, or Net Dollar Retention, is not as well known as MRR, but it is a very valuable metric. Especially for SaaS entrepreneurs. But why is NDR so important? In the first place, it is quite possible that your MRR will grow while you actually lose money. This can happen, for example, when the revenue stream from new customers exceeds the net loss of revenue from your existing user base.
Suppose your company starts this month with € 100.000 MRR. It books € 50,000 in new subscriptions, zero expansion income, suffers € 20,000 in downgrades, and € 5,000 in churn.
In this example, your MRR increases by no less than 25%. And yes, you can open the Champagne for that. But your NDR comes out at only 75%. You have lost 25% of your MRR from your current user base. And what was your marketing budget? What did you spend to acquire these new users?