NDR (Net Dollar Retention)
NDR doesn't measure whether you retain customers. It measures whether your existing customer base, on its own, already generates growth before you sell to a single new customer.
“With an NDR above 110%, the company grows even if the sales team takes an entire quarter off.”
Otto GTM ObservatoryWhy it's the investors' favorite metric
NDR isolates the health of the existing customer base from any new acquisition. An NDR of 115% means that even with zero new business, ARR would still grow 15% a year thanks to upsell, cross-sell, and low contraction.
This is why SaaS investors watch it more than total ARR growth: it separates sustainable growth from growth bought through an ever-rising CAC.
Anti-patterns
Common mistake: calculating NDR including new business, effectively turning it into a duplicate of total ARR growth and losing the signal that makes it useful.
Second mistake: publicizing a company-wide aggregate NDR when the value varies enormously across segments: a 130% enterprise figure can coexist with a 75% SMB figure, and the average hides a structural problem in an entire segment.
Practical Application
A customer cohort with €1,200,000 initial MRR generates €180,000 of expansion MRR, suffers €45,000 of contraction, and loses €60,000 to churn: NDR = (1,200,000 + 180,000 - 45,000 - 60,000) / 1,200,000 = 106.25%. Segmented, enterprise scores 124% while SMB scores 81%: two completely different intervention strategies.