Gross dollar retention is a metric used by SaaS companies to measure the revenue retained from existing customers over a given period of time. It takes into account the revenue lost due to churn (canceled or lost contracts) and the revenue gained from upsells and expansions.
To calculate gross dollar retention, a SaaS company first needs to determine the gross revenue earned from its existing customer base at the beginning of a given period (usually a year). At the end of the period, the company calculates the gross revenue earned from the same customer base, taking into account any revenue lost from churn.
The formula for calculating gross dollar retention is:
(Gross revenue at end of period – revenue lost from churn) / gross revenue at beginning of period
A gross dollar retention rate of 100% means that the company was able to retain all of its existing customers’ revenue over the period, taking into account both losses from churn and gains from expansions. A low gross dollar retention rate, on the other hand, may indicate problems with customer satisfaction or the company’s product offering.
