250 words on SaaS Net Dollar Retention

I'm learning about SaaS unit economics + growth each day - today I spent some time reading about NDR (net dollar retention) so thought I'd share here in this community - i know you guys are short on time so have kept this post to <250 words

Here goes:

Net Dollar retention is the percentage increase or retention in ARR/MRR over a particular time period.

NDR is important because it shows:

(a) how much additional growth a company acquires from its existing customers

(b) how engaged are users with your product

(c) how much recurring value are your users getting from the product over that time period

The NDR formula is:

(starting ARR + expansion ARR - contraction ARR - churned ARR) / (starting ARR) * 100

The median NDR is at 109%. Anything over 100% is good & anything above 120% is incredible.
For eg: Freshworks had an NDR of 117% at the time of its IPO in 2021

Some levers to move to optimize your NDR:

Customer success - keep your customer engaged with your company and invest in good CS

Value add - Provide recurring value & show the value other users are getting. You can leverage email marketing as a channel here

Study user patterns - Gather user sentiment about your product using metrics like NPS, feedback scores etc

User experience - User experience is key to ensuring high engagement rates. Use data & analytics to track key behavior and optimize for engagement & value delivery in-app

Upsells - Optimize to increase your lower paying users to higher-paying tiers. You wanna look at CAC : Expansion ARR ratio here

PS: I've made this essay so it fits into a mobile screenshot - I've made this "screenshot essay" here that you can download to your phone and read on the go if that's your jam!