What’s a Good Level of Net Dollar Retention?

One SaaS metric we monitor closely is net dollar retention. Net dollar retention tells you what percent of revenue from current customers you retained from the prior year, after accounting for upgrades, downgrades, and churn.

Track your competition.

Keep tabs on your competitors with automatic company activity alerts from Crunchbase, the leader in private-company data.

What is net dollar retention?

Formulaically, net dollar retention is the beginning of period revenue + upgrades — downgrades — churn all divided by beginning of period revenue. If that formula yields a number greater than 100%, then growth from your existing customer base more than offset any losses from that customer base.

How customers affect net dollar retention

Similarly, net retention below 100% means churn and downgrades were greater than any growth you enjoyed from the expansion of existing customers. If that’s the case, you need to take action with Customer Success and Customer Support to try and reverse the trend.

Generally, we find it’s not a product issue, but rather a customer success issue and/or onboarding issue. Even though the software is supposed to be easy, it’s not touchless. The customer will expect responsive and thorough customer service, especially for high ACV products. Likewise, if you don’t onboard the customer properly, we’ve found that you’re almost guaranteed to lose them.

What’s a good level of net retention?

So what’s a good level of net retention? To find out, we looked at publicly traded SaaS companies at their IPO and compared it to their net dollar retention today. Unfortunately not every SaaS company discloses this information, and indeed we found 36 companies that shared the data.

Net Dollar Retention on Average

What is a company’s net dollar retention on average

In summary, on the median, the net dollar retention was a healthy 106.5% at the time of IPO. Today it’s down slightly to 104.0%. Note that the top 5, which includes names like Box and Okta, were much stronger showing average net retention of 133% prior to IPO. The top 10 were 125.7% and the top 20 were 118.2%.

In summary, net retention is a critical figure: if you’re at ~106% you’re in line with the average if you’re below 100% do a little work to figure out what’s happening, and if you’re ~120%+, you’re in great company.

Crunchbase all in one prospecting solution graphic

Sammy is a co-founder of Blossom Street Ventures. They invest in companies with run-rate revenue of $2mm+ and year over year growth of 50%+. We can commit in 3 weeks and our check is $1mm. Email Sammy directly at sammy@blossomstreetventures.com.

  • Originally published November 26, 2018, updated April 26, 2023