Similarly, you can also calculate NDR by starting with the ARR from all subscription customers as of 12 months prior to the current month (Prior Period ARR). Then calculate the ARR from these same subscription customers as of the current month (Current Period ARR). Divide the Current Period ARR by the Prior Period ARR to come up with net dollar retention. Similar to the formula above, this formula includes any expansion and is net of contraction or churn over the trailing 12 months but excludes revenue from new subscription customers in the current period.
So what’s a good level of net retention? Below we present the net dollar retention of 98 SaaS IPO’s at the time of going public.
In summary, net retention is a critical figure: if you’re at 114% you’re in line with the median. If you’re below 100%, work to figure out what’s happening.
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