How To Calculate Gross Dollar Retention in Freshbooks | Arithmix

Calculating gross dollar retention is an important metric for any business looking to understand the health of its customer base. It helps you understand how much revenue you are retaining from existing customers over a given period of time. In this article, we will explore what gross dollar retention is, why it's valuable to calculate, and how to calculate it.

What Is Gross Dollar Retention?

Gross dollar retention is a metric that measures the amount of revenue a business retains from its existing customers over a given period of time. It takes into account the revenue generated from customers who were active in the previous period and compares it to the revenue generated from those same customers in the current period. This metric is important because it helps businesses understand how much revenue they are retaining from their existing customer base.

For example, if a business had 100 customers in the previous period and generated $10,000 in revenue from those customers, and in the current period, it had 90 of those same customers and generated $9,000 in revenue, then the gross dollar retention rate would be 90%.

When Is It Valuable To Calculate Gross Dollar Retention?

Calculating gross dollar retention is valuable for businesses of all sizes and industries. It helps businesses understand how much revenue they are retaining from their existing customer base and can help identify areas where they need to improve customer retention.

For example, if a business has a low gross dollar retention rate, it may indicate that customers are not satisfied with the product or service and are choosing to take their business elsewhere. This can help businesses identify areas where they need to improve their product or service to retain customers and increase revenue.

Additionally, gross dollar retention can help businesses identify which customers are the most valuable and which ones are at risk of leaving. By understanding which customers are generating the most revenue and which ones are at risk of leaving, businesses can develop targeted retention strategies to keep those customers happy and engaged.

How To Calculate Gross Dollar Retention

To calculate gross dollar retention, you need to follow these steps:

1. Determine the total revenue generated from existing customers in the previous period.
2. Determine the total revenue generated from those same customers in the current period.
3. Divide the revenue generated in the current period by the revenue generated in the previous period and multiply by 100 to get the gross dollar retention rate.

For example, if a business generated $10,000 in revenue from existing customers in the previous period and $9,000 in revenue from those same customers in the current period, the calculation would be:

($9,000 / $10,000) x 100 = 90%

Therefore, the gross dollar retention rate for this business would be 90%.

In conclusion, calculating gross dollar retention is an important metric for any business looking to understand the health of its customer base. By understanding how much revenue is being retained from existing customers, businesses can develop targeted retention strategies to keep those customers happy and engaged.

How Do You Calculate Gross Dollar Retention in Freshbooks

Freshbooks itself isn’t naturally geared towards letting you calculate complex metrics like Gross Dollar Retention. As an alternative, teams typically use products like Arithmix to import data from Freshbooks and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Freshbooks, combine it with data from other systems, and create calculations like Gross Dollar Retention.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Gross Dollar Retention in Arithmix

Calculating metrics like Gross Dollar Retention is simple in Arithmix. Once you've created your free account, you’ll be able to import your Freshbooks data, and use it to create natural language formulas for metrics like Gross Dollar Retention.

Arithmix is designed to give you the power to build any calculations you want on top of your Freshbooks data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.