How to Make Net Dollar Retention Your Strongest Fundraising Signal
- gandhinath0
- Apr 23
- 3 min read
Updated: May 6
Net Dollar Retention (NDR) isn't just a number - it shows if your business has real momentum. Ask any investor today: they'll pick strong retention over rapid growth.
Gone are the days when investors would fund companies losing customers as fast as they gain them. This post helps B2C and B2B2C SaaS founders (making $1M-$10M yearly) understand what good looks like, what to watch out for, and how to improve your numbers - all in one quick read.
What is Net Dollar Retention (NDR)
Definition:
Net Dollar Retention shows how much money a company keeps from its current customers over time. This includes customers who spend more, spend less, or leave entirely. It's a way to measure both how well a company keeps its customers and how much those customers grow their spending.Formula:
NDR= (
(Starting MRR+Expansion MRR−Contraction MRR−Churned MRR)
÷
(Starting MRR)
) X 100Key Components:
Starting MRR: Money that current customers pay each month when the period begins.
Expansion MRR: Extra money when customers buy more or switch to higher-priced plans.
Contraction MRR: Money lost when customers reduce their plans or use less.
Churned(Lost) MRR: Money that disappears when customers cancel completely.
Example Calculation
For example, a B2C SaaS company with $100k Starting MRR, $15k Expansion, $8k Contraction, and $10k Churn would have:
NDR = (
(100,000+15,000−8,000−1,000)
÷
(100,000)
) X 100% = 97%This sub-100% NDR highlights challenges in B2C models, where high churn and limited expansion opportunities are common.
Why It Matters
Net Dollar Retention (NDR) shows if your existing customers are spending more or less over time. When NDR is above 100%, it means your current customers are increasing their spending. Investors like high NDR because it shows customers value your product and keep using it.
NDR vs. NRR: Why they are different in spite of perceived sameness
What They Track:
NDR: Only customers who joined in the same month
NRR: All customers at once, irrespective of the month of joining
Investor Preferences:
NDR tells investors, "Look how well new customers stick around and spend more!"
NRR tells investors, "Look how well we grow revenue from all customers over time!"
When to Use:
NDR: Testing if new features increase existing customer spending
NRR: Measuring impact of big changes like price updates on old and new customers
In simpler terms:
NDR: Tracks how much a January customer spends all year. Answers “How well do we grow money from new groups?”
NRR: Tracks how much all customers spend that entire year, regardless of joining date. Answers “How well do we grow money from everyone?”
Better Revenue Data: 5 Tracking Mistakes & Fixes
Ignoring Segmentation: Don't mix customer groups in your tracking. Big customers can mask problems with smaller ones. Track $10/month users separately from $50+/month users to spot real trends.
Mislabeling Existing Customers: Count only existing customers in your calculations. New customers skew the numbers - leave them out.
Annual vs. Monthly Mismatch: Stick to one timeframe - monthly or yearly. Monthly views can hide annual problems.
Overlooking Non-Monetary Expansion: Watch your product usage patterns. If pricing isn't usage-based, you'll miss growth signals. Consider usage-based pricing tiers.
Underestimating Churn Timing: Long contracts can hide problems until renewal. Use cohort analysis to track similar customers and spot trends early.
Benchmarks SaaS Founders Should Aim For
Data sourced from SaaS Capital, Wall Street Prep, Deloitte, Kruze Consulting, Stripe, and ChartMogul.
Growth Stage | B2C Benchmarks | B2B2C Benchmarks | Strategic Priorities |
Validation Seekers ($1M-$2M ARR) | 90–100% (Median: 95%) | 95–105% (Median: 100%) |
|
Traction Builders ($2M-$4M ARR) | 95–102% | 100–110% |
|
Scale Preparers ($4M-$7M ARR) | 100–108% | 105–115% |
|
Growth Accelerators ($7M-$10M ARR) | 105–115% | 110–125% |
|
NDR - Assess and Strategize
Watch Usage Patterns
Monitor user activity in logs
Set 14-day inactivity alerts
Trigger retention actions early
Build Automatic Growth Triggers
Track usage vs plan limits
Auto-notify at 80% threshold
Convert usage into upgrades
Prove Value
Add usage dashboards
Show ROI metrics
Learn from Elastic/Twilio (140%+ retention)
Behavior-based Targeting
Segment by usage, not just plans
Use behavior data for upgrades
Personalize retention actions
Align Price to Usage
Track measurable metrics (API calls, seats)
Key Takeaways
NDR is more than a metric - it signals future revenue potential
For B2C companies, having NDR below 100% isn't failure - you need killer CAC efficiency
B2B2C companies achieve better NDR than B2C due to greater pricing power and stronger customer relationships
For early-stage startups especially, showing improving NDR matters more than hitting a 120% target
Segment your customers. Track their behavior. Grow their spending. Keep repeating
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