What it is: NDR, also known as net revenue retention, measures the revenue retained from existing customers, accounting for both expansion and churn. It provides insights into the growth and revenue stability of SaaS companies.
Why it is important: NDR is a crucial metric for SaaS companies to evaluate their revenue retention and expansion efforts. It helps identify the net impact of upselling, cross-selling, and customer churn on the company's overall revenue. NDR reflects the company's ability to retain and grow revenue from its existing customer base, which is often more cost-effective than acquiring new customers.
Formulas: NDR = (Revenue from Existing Customers at the End of a Period - Revenue from Churned Customers) / Revenue from Existing Customers at the Start of a Period
How to use it in the context of startups: Startups operating in the SaaS industry can use NDR to assess their customer base's health and growth potential. By tracking NDR over time, startups can identify factors affecting revenue retention, optimize their expansion strategies, and prioritize customer success and retention initiatives.
