How do you increase net dollar retention?

To increase your net dollar retention (NDR), you must promote and secure account expansions while reducing churn. Easier said than done, we know. This is why your net dollar retention, also referred to as net revenue retention (NRR), can be such a powerful tool—it shows you all the recurring revenue changes by accounting for fluctuations within your existing customer base.

After calculating your NDR, how do you turn that data into account expansions and reduced churn? And what steps lead to improving net revenue retention? Let’s talk about it.

What Is a Good Net Dollar Retention?

An NDR rate at 100% or more is considered good, although a rate between 90% and 100% is also acceptable for smaller businesses or start-ups. You can calculate your business’s NDR by adding your recurring revenue to any upgrade income, and then subtracting revenue lost to churn and downgrades. To get NDR as a percentage, divide that total by your recurring revenue. As a formula, it would look like this:

(Recurring Revenue + Upgrade Revenue - Revenue Lost to Churn - Revenue Lost to Downgrades) / Recurring Revenue

For your recurring revenue number, you’ll need to decide if you want to measure net dollar retention for the month, quarter, or year. It’s usually best to do all three—then you can compare your annual, monthly, and quarterly net dollar retention. This will show you how your business is faring at different points in time. Whichever time period you are calculating NDR for, use the recurring revenue number you have at the start of that period for consistency.

These calculations are rarely done by hand—most companies use revenue management software to keep track of these numbers. But it’s always helpful to understand the calculations behind the numbers to better analyze your organization’s health.

How Do You Increase NDR?

Once you’ve figured out your NDR, the next step is asking, “​​How do you grow NDR?” The answer will look a little different depending on the unique needs of your company. Still, most organizations can benefit from the following:

• Track Your NDR - This one seems a little obvious, but regular monitoring of NDR is key to boosting it. If you’re not sure where you stand or how much you’ve grown, it’s nearly impossible to plan a path moving forward.

• Don’t Forget GDR - Looking at your net dollar retention vs gross dollar retention (GDR) will provide some valuable insight. The gross dollar retention formula is almost the same as the net dollar retention formula, except it doesn’t factor in additional revenue from upgrades. GDR will allow you to see just how much churn and downgrades are hurting your revenue, while NDR will show you how all your upsell or cross-sell strategies are working.

• Develop Account Expansion Options - Many businesses offer an account expansion model by providing additional services as you move up payment tiers. Some will even offer a free first tier (sometimes called “freemium”) or a free trial period to get customers in the door. Once a customer has had time to use your product or service for free—and they like the results—they may be more inclined to consider a paid account or add-on products.

• Sell Those Account Expansion Options - Simply putting a payment plan chart on your website isn’t going to do the trick. You must make customers aware that these options exist and how they can benefit from upgrading. For example, a SaaS company might leave links or options to upgraded services visible at lower tiers. Then, if a lower-tiered customer tries to interact with that option, they are taken to an upgrade page or get a pop-up message about upgrading.

• Help Your Customers 24/7 - We all want to help our customers understand our offerings, but the more you are available to answer questions and the quicker you can answer them, the lower your churn rate will be. Consider setting up a dedicated help center to provide as much guidance as possible about your services and offerings. Many companies also offer chat options on their website to answer any questions customers have as they arise.

• Get Feedback - It’s easy to assume everything is great without outside feedback. Your customers are the ones using your services and products on a regular basis, and they probably have plenty of suggestions to improve your offerings. How do you get that feedback? To start, try sending out surveys, offering incentives for feedback, observing how customers are interacting with your social media, or simply having a feedback box on your website.

• Always Seek Improvement - You can gather all the feedback and data you want, but it’s what you do with that information that really makes the difference. If you fail to solve a pain point your customers are having, and your competitor develops a solution for that exact problem—you’ll likely lose customers. No business is perfect, and there will always be room for improvement.

And our number one tip for increasing NDR is to find a customer platform that does most of the work for you — like Planhat.

Planhat: The Best Platform for Revenue Management

If you’re tired of painful pivot tables and clunky spreadsheets to monitor and manage revenue, Planhat is the solution you’ve been looking for. We want our customers to feel in control of their data, so we offer a variety of ways for you to manage and analyze the health of your business. Here’s what you can expect from our platform:

• Quick overviews of your renewals, churn, and new bookings

• Real-time metrics

• Forecasting for visibility into future renewals and at-risk accounts

• Health scores that show you which accounts are doing well and which need some attention

• Invoicing and collection management to see upcoming, pending and overdue invoices

• Integration options to sync your data with your current CRM or ERP

A customer-centric approach starts with customer data, and now you can have all that data in one place with Planhat. Plus, our platform offers options for automation, workflow, and presentations, taking you through each step of data gathering and analysis. If you’re ready to take your customer success team to the next level, contact us today for a demo to see our platform in action!