Gross vs. Net Dollar Retention (GDR vs NDR)

Two Sides of the Same Coin

GDR and NDR both measure how much revenue you're keeping from existing customers. But they tell different stories, and understanding the difference is critical for advisory conversations.

Gross Dollar Retention (GDR)

GDR answers: "Of the revenue we had from existing customers last period, how much did we keep — ignoring any growth?"

GDR looks only at contraction and churn. It is capped at 100% because it intentionally excludes expansion. If customers who paid you $100 last period paid you $92 this period (ignoring any new spending above their baseline), your GDR is 92%.

The formula:

GDR = (Prior Period Revenue - Contraction - Churned Revenue) / Prior Period Revenue

GDR can never exceed 100%. It measures how well you hold onto what you already have.

What GDR tells you: How much revenue is leaking out. If GDR is 85%, you're losing 15 cents of every dollar each period. That's the baseline rate of decay. No matter how much new revenue you add, GDR tells you how fast the bucket drains.

Net Dollar Retention (NDR)

NDR answers: "Looking at all existing customers — including those who spent more — did this customer base grow or shrink?"

NDR includes expansion, contraction, and churn. It can exceed 100%, and when it does, it means your existing customers are worth more today than they were last period — without adding a single new customer.

The formula:

NDR = (Prior Period Revenue + Expansion - Contraction - Churned Revenue) / Prior Period Revenue

What NDR tells you: The overall trajectory of your customer base's value. NDR above 100% means the business grows even if sales stopped acquiring new customers tomorrow. NDR below 100% means you're on a treadmill — you have to keep adding new customers just to stay flat.

A Practical Example

Say a business had $100K in revenue from existing customers last quarter.

• 3 customers stopped buying entirely: -$8K (churn)
• 5 customers reduced their spending: -$4K (contraction)
• 7 customers increased their spending: +$20K (expansion)

GDR = ($100K - $4K - $8K) / $100K = 88%

You lost 12% of your base revenue to churn and contraction.

NDR = ($100K + $20K - $4K - $8K) / $100K = 108%

But expansion more than covered the losses — the existing customer base grew 8% net.

What "Healthy" Looks Like

These benchmarks apply to most recurring-revenue and repeat-transaction businesses:

• GDR above 85% — you're retaining most of your revenue base
• GDR above 90% — strong retention, low leakage
• NDR above 100% — existing customers are growing
• NDR above 110% — excellent expansion dynamics

When GDR is low but NDR is high, it means you're making up for churn with expansion from remaining customers. That works until it doesn't — the customers carrying that expansion have a limit. Low GDR is always worth investigating, even when NDR looks healthy.

Using GDR and NDR Together

The gap between GDR and NDR tells you how dependent the business is on expansion to cover its losses.

• Small gap (GDR 93%, NDR 98%) — low churn, modest expansion. Stable business.
• Large gap (GDR 78%, NDR 105%) — high churn being masked by expansion. Fragile. Fix the leakage before the expansion slows down.

When you put both numbers in front of a client, the conversation moves from "how are we doing" to "here's exactly where we're strong and where we're exposed." That's the advisory conversation worth having.