Dollar-Based Retention

What is Dollar-Based Retention?

Dollar-Based Retention, also called Net Revenue Retention (NRR) or Net Dollar Retention (NDR), is a SaaS metric that measures the percentage of recurring revenue retained from existing customers over a specific period, accounting for expansions, contractions, and churn. It answers the fundamental question: If you stopped acquiring new customers today, would your revenue grow or shrink based solely on your existing customer base?

Unlike logo retention (which simply counts the percentage of customers who remain), Dollar-Based Retention provides a nuanced view of customer value changes over time. A cohort of customers who each paid $10,000 annually might generate $11,500 in year two if some expand to $15,000 (buying additional seats or modules) while others contract to $8,000 or churn entirely. If the cohort generates $11,500 from the original $10,000 base, the Dollar-Based Retention rate is 115%. This metric has become the single most important indicator of SaaS business health for investors, with companies achieving 120%+ NRR commanding premium valuations.

The metric gained prominence as subscription business models matured and executives realized that customer acquisition cost (CAC) only tells half the story—long-term profitability depends on expanding revenue from existing customers faster than losing it to churn and downgrades. According to research from Bessemer Venture Partners' State of the Cloud, top-quartile public SaaS companies maintain Dollar-Based Retention rates above 120%, meaning their existing customer base grows revenue by 20% annually without any new customer acquisition. This metric is calculated monthly or annually, with annual calculations providing more stable benchmarking.

Key Takeaways

• Growth Without Acquisition: Dollar-Based Retention above 100% means existing customers generate revenue growth without new logo acquisition, indicating strong product-market fit and expansion potential

• Investor Priority Metric: Public SaaS companies routinely report NRR in earnings calls, with 120%+ rates driving premium valuations and 130%+ indicating exceptional performance

• Expansion Matters More Than Churn: A company with 5% logo churn can still achieve 120% NRR if remaining customers expand significantly through upsells, cross-sells, and pricing increases

• Leading Indicator: Dollar-Based Retention predicts future growth sustainability better than new customer acquisition metrics alone

• Cohort-Based Calculation: Most accurate when calculated by customer cohort (customers who started in the same period) rather than overall revenue snapshots

How It Works

Dollar-Based Retention operates through a time-based comparison of recurring revenue from a defined customer cohort:

Stage 1: Define the Cohort and Time Period
Select a customer cohort (all customers active at the beginning of the measurement period) and define the timeframe (typically 12 months for annual NRR or 1 month for monthly NRR). For example, a company might analyze all customers who were active on January 1, 2025, measuring their revenue contribution through December 31, 2025. The cohort includes only customers who existed at the period start—new customers acquired during the period are explicitly excluded from this calculation.

Stage 2: Calculate Starting Revenue (Beginning ARR)
Sum the annual recurring revenue (ARR) or monthly recurring revenue (MRR) from the cohort at the period start. If 100 customers each paid $10,000 annually on January 1, the starting ARR is $1,000,000. This baseline represents the revenue at risk—the maximum amount you could lose if every customer churned. For subscription businesses, this typically comes from CRM systems like Salesforce or billing platforms like Stripe or Chargebee.

Stage 3: Track Revenue Changes Throughout Period
Monitor four categories of revenue changes from the original cohort:
- Expansions: Customers who increased their spending (additional seats, upgraded tiers, cross-sell products)
- Contractions: Customers who decreased spending (reduced seats, downgraded tiers, partial cancellations)
- Churned Revenue: Customers who canceled entirely
- Reactivations: Previously churned customers from the cohort who returned (rare in annual calculations)

Stage 4: Calculate Ending Revenue
Sum the revenue from the original cohort at period end. Using the example above, if the 100-customer cohort now generates $1,150,000 in ARR (even if only 90 customers remain, with the remaining 90 having expanded significantly), the ending revenue is $1,150,000. Crucially, this calculation excludes any new customers acquired during the measurement period—only the original cohort's revenue evolution matters.

Stage 5: Compute Dollar-Based Retention Rate
Apply the formula: (Ending ARR from Cohort / Starting ARR from Cohort) × 100. In the example: ($1,150,000 / $1,000,000) × 100 = 115% NRR. This indicates that existing customers collectively grew revenue by 15% despite some churn and contractions. Modern analytics platforms like ChartMogul, Baremetrics, or custom data warehouse queries automatically calculate these metrics from subscription data.

According to SaaS Capital's B2B SaaS benchmarking survey, median Dollar-Based Retention for B2B SaaS companies is approximately 105%, with top performers exceeding 120% and struggling companies falling below 90%.

Key Features

• Cohort-Based Methodology: Tracks specific customer groups over time rather than overall revenue snapshots

• Expansion-Inclusive: Captures upsells, cross-sells, and pricing increases that traditional churn metrics miss

• New Customer Agnostic: Excludes new customer acquisition to isolate existing customer value trajectory

• Time-Period Flexible: Can be calculated monthly (for operational monitoring) or annually (for strategic benchmarking)

• Comparable Across Companies: Standardized metric enabling benchmarking against industry peers and competitors

Use Cases

Use Case 1: Product Expansion Strategy Validation

A project management SaaS company launches a new time-tracking module as an upsell to their core product. Before the launch, their Dollar-Based Retention was 102% (minimal expansion, low churn). Six months after launch, they calculate NRR for the cohort that existed pre-launch and discover it has increased to 118%. Analysis reveals that 35% of customers adopted the time-tracking module at $50/month per user, driving significant expansion revenue. This validates the product expansion strategy and informs the product roadmap—the company accelerates development of additional modules (invoicing, resource planning) to sustain high NRR. They use product usage signals and feature adoption tracking to identify which customers are most likely to expand next.

Use Case 2: Customer Success Resource Allocation

A customer success leader at an enterprise software company analyzes Dollar-Based Retention by customer segment. Enterprise customers (>$100K ACV) show 135% NRR driven by account expansion and multi-product adoption. Mid-market customers ($25K-$100K ACV) show 98% NRR with high churn offsetting modest expansion. SMB customers (<$25K ACV) show 85% NRR with high churn and minimal expansion. Based on these insights, the company reallocates customer success resources: assigns dedicated customer success managers to all enterprise accounts, implements digital customer success for mid-market, and explores product-led growth approaches for SMB. Within one year, mid-market NRR improves to 110% through proactive expansion programs.

Use Case 3: Valuation and Fundraising Positioning

A Series B SaaS startup prepares for fundraising and focuses on improving Dollar-Based Retention as a key investor metric. Their analysis reveals 108% NRR, below the 120% benchmark that commands premium valuations. The team implements several initiatives: launches usage-based pricing tiers to capture natural expansion as customers grow, introduces a professional services offering that drives product adoption depth, and builds a customer health scoring system to reduce churn from at-risk accounts. They also use platforms like Saber to identify expansion signals like hiring growth, funding events, or new office openings that indicate expansion readiness. Six quarters later, NRR reaches 125%, significantly strengthening their fundraising position and enabling a successful Series C raise at a higher valuation multiple.

Implementation Example

Here's a comprehensive Dollar-Based Retention tracking framework for data warehouses and analytics platforms:

Dollar-Based Retention Formula

NRR = (Starting ARR + Expansion - Contraction - Churn) / Starting ARR × 100
<p>Or alternatively:<

Sample Calculation - Annual NRR

Cohort: All customers active on January 1, 2025
Period: January 1, 2025 - December 31, 2025

Interpretation: The company retained 110% of revenue from the January cohort. Even though 10% of customers churned, the remaining 90 customers expanded enough to grow cohort revenue by 10%.

Revenue Movement Breakdown

Dollar-Based Retention Waterfall Analysis
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
<p>$1,000K Starting ARR (100 customers)<br>↓</p>
<ul>
<li>$250K Expansion (40 customers upsold)<br>↓<br>$1,250K Gross Revenue Before Churn<br>↓</li>
</ul>

SQL Query for Data Warehouse

WITH cohort_start AS (
  SELECT
    customer_id,
    SUM(mrr) as start_mrr,
    '2025-01-01' as cohort_date
  FROM subscriptions
  WHERE subscription_status = 'active'
    AND DATE_TRUNC('month', start_date) <= '2025-01-01'
    AND (end_date IS NULL OR end_date >= '2025-01-01')
  GROUP BY customer_id
),
cohort_end AS (
  SELECT
    cs.customer_id,
    cs.start_mrr,
    COALESCE(SUM(s.mrr), 0) as end_mrr,
    CASE
      WHEN SUM(s.mrr) > cs.start_mrr THEN 'expansion'
      WHEN SUM(s.mrr) < cs.start_mrr AND SUM(s.mrr) > 0 THEN 'contraction'
      WHEN SUM(s.mrr) = 0 OR SUM(s.mrr) IS NULL THEN 'churned'
      ELSE 'maintained'
    END as movement_type
  FROM cohort_start cs
  LEFT JOIN subscriptions s
    ON cs.customer_id = s.customer_id
    AND s.subscription_status = 'active'
    AND DATE_TRUNC('month', s.start_date) <= '2025-12-31'
    AND (s.end_date IS NULL OR s.end_date >= '2025-12-31')
  GROUP BY cs.customer_id, cs.start_mrr
)
SELECT
  SUM(start_mrr) as starting_mrr,
  SUM(end_mrr) as ending_mrr,
  (SUM(end_mrr) / SUM(start_mrr)) * 100 as dollar_based_retention_pct,
  COUNT(*) as cohort_customers,
  COUNT(CASE WHEN movement_type = 'churned' THEN 1 END) as churned_customers,
  COUNT(CASE WHEN movement_type = 'expansion' THEN 1 END) as expanded_customers,
  COUNT(CASE WHEN movement_type = 'contraction' THEN 1 END) as contracted_customers
FROM cohort_end;

Segmented NRR Analysis

Industry Benchmarks

According to KeyBanc Capital Markets' SaaS Survey, the median NRR for public SaaS companies consistently hovers around 115-120%, with best-in-class performers like Snowflake, Datadog, and HashiCorp reporting NRR above 130%.

Related Terms

• Net Revenue Retention (NRR): Alternate name for Dollar-Based Retention, the same metric

• Annual Recurring Revenue (ARR): The baseline revenue metric used in NRR calculations

• Churn Rate: Percentage of customers or revenue lost, a key component affecting Dollar-Based Retention

• Expansion Revenue: Revenue growth from existing customers through upsells, cross-sells, and usage increases

• Customer Lifetime Value (CLV): Long-term customer value metric influenced heavily by retention and expansion rates

• Logo Retention: Percentage of customers retained, distinct from revenue retention

• Gross Revenue Retention: Revenue retention excluding expansion, showing retention floor before growth

• Customer Success: Function responsible for driving retention and expansion that improve Dollar-Based Retention

Frequently Asked Questions

What is Dollar-Based Retention?

Quick Answer: Dollar-Based Retention (also called Net Revenue Retention or NRR) measures the percentage of recurring revenue retained from existing customers over time, including expansions, contractions, and churn—typically expressed as a percentage like 115% or 120%.

Dollar-Based Retention reveals whether your existing customer base is growing or shrinking in value. It's calculated by comparing revenue from a customer cohort at two points in time, accounting for all changes in spending. A rate above 100% indicates that expansion revenue from upsells, cross-sells, and price increases exceeds revenue lost to churn and downgrades. This metric has become the gold standard for evaluating SaaS business health and growth sustainability.

How do you calculate Dollar-Based Retention?

Quick Answer: Calculate Dollar-Based Retention by dividing ending ARR from a customer cohort by their starting ARR, then multiplying by 100. Formula: (Ending ARR / Starting ARR) × 100, excluding any new customers acquired during the period.

Start with all customers active at the beginning of your measurement period (e.g., January 1) and their total ARR. Track how their spending changes over the period through expansions, contractions, and churn. At period end (e.g., December 31), sum the ARR from only those original customers—ignore any new customers acquired. Divide ending ARR by starting ARR and multiply by 100. For example: $1.2M ending ARR / $1M starting ARR = 120% NRR.

What's the difference between Gross and Net Revenue Retention?

Quick Answer: Gross Revenue Retention excludes expansion revenue and measures only the revenue retained before upsells (typically 85-95%), while Net Revenue Retention (Dollar-Based Retention) includes expansion and can exceed 100%.

Gross Revenue Retention shows your retention floor—the percentage of revenue you'd keep if no customers expanded. It's calculated as (Starting ARR - Churned ARR - Contraction ARR) / Starting ARR. If you started with $1M ARR and lost $100K to churn and contractions, Gross Retention is 90%. Net Revenue Retention adds expansion revenue back in. Using the same example, if expansion revenue was $250K, Net Retention would be 115%. Gross Retention reveals churn problems, while Net Retention reveals overall customer value trajectory.

What is a good Dollar-Based Retention rate?

Benchmarks vary by company maturity and segment, but generally: 120%+ is excellent and investment-grade, 110-120% is strong and indicates healthy expansion, 100-110% is acceptable but suggests limited expansion engine, 90-100% is concerning as existing customers are declining in value, and below 90% indicates serious retention or expansion problems. Enterprise-focused SaaS companies typically achieve higher NRR (120-140%) than SMB-focused companies (95-110%) due to lower churn and larger expansion potential. Product-led growth companies with usage-based pricing often achieve 120%+ NRR through natural expansion as customers grow.

How can you improve Dollar-Based Retention?

Improve Dollar-Based Retention through three levers: reduce churn by implementing customer health scoring and proactive intervention, minimize contractions by demonstrating continuous value and preventing downgrades, and maximize expansions through land-and-expand strategies, cross-sell programs, usage-based pricing, and account-based expansion plays. Tactical improvements include: building a dedicated customer success function, implementing product-led growth motions that drive natural expansion, developing a portfolio of upsell and cross-sell products, creating usage-based pricing that captures customer growth, and using data platforms like Saber to identify expansion signals (hiring, funding, new locations) that indicate readiness to expand. Focus measurement on cohort analysis to understand which customer segments drive highest NRR and double down on those profiles.

Conclusion

Dollar-Based Retention has emerged as the definitive metric for evaluating SaaS business quality and growth sustainability. Unlike vanity metrics that can be manipulated through aggressive acquisition spending, NRR reveals the fundamental health of customer relationships and product-market fit. Investors increasingly prioritize this metric in valuation decisions, with companies achieving 120%+ NRR commanding premium multiples and 130%+ indicating world-class performance that justifies aggressive growth investment.

For revenue operations teams, Dollar-Based Retention provides a north-star metric that aligns sales, marketing, customer success, and product organizations around customer value expansion. Marketing teams focus on acquiring customers with high expansion potential. Sales teams structure initial deals to enable land-and-expand motions. Customer success teams drive adoption, prevent churn, and identify expansion opportunities. Product teams build features that justify price increases and enable natural usage expansion. This metric bridges historically siloed functions around shared outcomes.

As SaaS business models continue evolving toward product-led growth, consumption-based pricing, and multi-product platforms, Dollar-Based Retention will become even more critical. Companies that master the balance of retention and expansion—reducing churn through excellent customer experience while driving expansion through value creation—will build sustainable competitive advantages. The future of B2B SaaS belongs to companies that don't just acquire customers efficiently, but expand them profitably over time, as measured definitively by Dollar-Based Retention.

Last Updated: January 18, 2026