Gross Dollar Retention (GDR) tracks the percentage of the original recurring revenue that a group of customers retains over time. GDR shows the net impact that contraction, and churn have on a business. Especially when compared with logo retention, GDR demonstrates the revenue impact of churned customers. Some logo retention is inevitably and not fatal for a business; if small ACV customer are more likely to churn and large customers retain well, companies can maintain high GDR.
Gross Dollar Retention = the lesser of current ARR and ARR in a specific past period from customers active in that period ÷ ARR from those customers in that past period
There are three methods of calculating GDR:
Trailing Period: Recurring revenue from all active customers at a certain point (eg October 2023) is compared to recurring revenue (excluding expansion) from those customers 1, 3, 6, or 12 months later.
Cohorted: Customers are grouped by cohort (sign-up period). The cohort’s original revenue is compared to recurring revenue from that cohort a fixed amount of time (eg 12 months) later (excluding expansion).
Renewal: For customers who are up for renewal, the recurring revenue of their expiring contract is compared to the recurring revenue from their new contract (excluding expansion).
All three methods give unique insights: trailing period helps show the most recent trend for the customer base as a whole, cohorted retention shows how a customer may behave at a certain age, and renewal retention is good guidance for customers who are coming up for renewal. No matter how you measure, GDR is essential to understanding how much recurring revenue you have lost historically, and likely will in the future. NDR often gets more attention, but can be heavily weighted by large expansions, which is more common when the macro environment is good and customers are early in their lifecycle. Even if a company has high NDR, if GDR is low because many customers are churning, or a smaller number of large ACV customers are churning, eventually the overall retention and growth of the business will degrade.