Monday, March 27, 2023

Net Dollar Retention (NDR)

Net Dollar Retention (NDR) is a metric used by businesses to measure how much revenue they are able to retain from their existing customers over a given period of time. It's calculated by dividing the total revenue generated from existing customers at the end of a period by the total revenue generated from those same customers at the beginning of that period.

NDR is important for businesses because it shows how effective they are at keeping their customers and generating repeat business. A high NDR means that customers are happy with the company's product or service and are willing to continue buying from them, which can lead to more revenue and growth in the long run.

For example, let's say a company starts a quarter with $100,000 in revenue from existing customers, and by the end of the quarter, they have generated $110,000 in revenue from those same customers. If we divide $110,000 by $100,000 and multiply by 100, we get an NDR of 110%.

NDR is sometimes also referred to as Net Revenue Retention (NRR).

A high NDR means that a business is able to retain a significant amount of revenue from their existing customer base over time. This can be a positive sign for investors, as it suggests that the business has a loyal customer base and is able to generate recurring revenue. On the other hand, a low NDR may indicate that a business is struggling to retain customers and may need to focus on improving customer satisfaction or retention strategies.

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