September 15, 2022
What is a good net dollar retention benchmark?
Rob Mahoney
Strategic Parternships, Planhat
A good net revenue retention (NRR) rate will vary by industry and growth phase, but in general a rate of around 100% is a good benchmark for a Software as a Service (SaaS) company. If your company isn’t quite there yet, setting the goal of improving net revenue retention retention is a good place to start. Let’s explore some of the ways a net dollar retention benchmark may vary so you better know how your company’s score fits in.
What Is a Good Net Retention Rate by Industry?
Because different industries vary so widely, it’s impossible to give one universal benchmark for Net Retention Rate (NRR) that works for every company. To give you an idea of the range:
Ecommerce businesses average a 30% NRR
Restaurants average a 55% NRR
SaaS companies average a 100% NRR
When you think about what a dollar net retention rate is, it becomes easier to understand why there would be such a big difference between these different industries. Net dollar retention rate (or net revenue retention rate for companies dealing with non-dollar currency) is calculated with the formula:
[Monthly Recurring Revenue + (Upgrades + Expansion) - (Churn + Downgrade)]/ Monthly Recurring Revenue
For most ecommerce and restaurant businesses, customers do not make predictable purchases at set intervals. These markets are very saturated, with many different customer options. These industries do not rely on existing customers returning and upgrading as the core of their business model, so a low NRR is not surprising or problematic.
For a SaaS company that operates on a subscription model or relies on continuing customer usage, a NRR of 30% - 50% as seen in restaurants and ecommerce would be disastrous. The net dollar retention for SaaS should average between 90% and 130% in companies that want to stay competitive.
Why Do SaaS Customer Retention Metrics Matter?
Looking back at the title of this blog, not only do we want to consider what a net dollar retention calculator says our NRR number is, but why we care about it and how it can help our business to improve. A benchmark is defined as a reference point to assess something against, and comparing your company’s ability to retain and upgrade customers to competitors shows if you need improvement in that area.
The SaaS world is a highly competitive one, and if your company is not keeping its existing customers happy and coming back for more, it is unlikely that you will remain successful for long. So when you ask “what is a good net dollar retention rate” what you are actually trying to figure out is if customers like, use, and want more of what you are selling.
So how can you improve what you are currently doing for your customers to make sure your NRR stays competitive? Different niche software, or one comprehensive solution, is key to tracking your customers journey. Let’s break down each of the steps of a customer’s journey to see how it can be improved along the way!
Customer Data Platform
– Collect all relevant information from customers that makes it easy to input
– Store it all in one easy to use platform for your company to use
Client Onboarding Software
– Get new clients onboarded quickly and easily
– Provide ongoing customer training as your software improves
Customer Success Software
– Empower your customer success (CS) team with great tools
– Make CS the rockstars of your company by centering the customer experience and health
Client Portal
– Engage clients with a great customer experience in your product
– Collaborate with them for a higher retention rate
Customer Revenue Optimization
– Optimize revenue with easy upgrades and add-ons
– Reduce churn and downgrades
Planhat: Your Award Winning One Stop Shop for Customer Success
We at Planhat specialize in helping you manage and grow your customers. We know keeping your customers happy is the key to unlocking a healthy net revenue retention and driving growth for your business. Our modern customer platform is specifically designed to be there for every step of a customer’s journey, and we have the G2 customer reviews to prove it!
So whether you have already reached your NRR benchmarks or are working to improve them, get a demo or find the best plan for you to keep on track with all your customer success needs.
Rob Mahoney
•
Strategic Parternships, Planhat
Rob drives Planhat's enterprise sales efforts in the US. He's spent has spent the past decade in SaaS, most notably at Pendo and Citrix, specialising in customer success.
