Net Dollar Retention (NDR) and Net Revenue Retention (NRR) are both important measurements in any business but many companies conflate the two or (more frequently) only report on one. Both are key metrics but for different reasons. Equally important is separating out NRR for your largest customers versus the rest of your customers since often the behavior of large customers is markedly different than average customers. Their effect on a business and can be hidden in aggregate data and a sense of their impact is lost.
NDR and NRR are as defined as follows:
- NDR measures the average percentage change in revenue over the first 12 months of a customer.
- NRR measures the percentage of revenue retained from all customers (regardless of time as a customer) over a rolling moving 12-month window
Both tell you a lot about the health of your business, but I’ve found that most companies report on NRR (which they typically call NDR) rather than on both.
Quick food for thought for today…