How To Calculate Net Dollar Retention in Insightly | Arithmix

Calculating net dollar retention is an essential metric for any business that wants to measure its growth and success. It helps you understand how much revenue you are retaining from your existing customers and how much you are losing to churn. In this article, we will discuss what net dollar retention is, when it is valuable to calculate it, and how to calculate it.

What Is Net Dollar Retention?

Net dollar retention is a metric that measures the revenue retained from existing customers over a specific period. It takes into account the revenue lost due to churn, upgrades, and downgrades. The formula for calculating net dollar retention is straightforward:

Net Dollar Retention = (Revenue from Existing Customers at the End of the Period – Revenue from Churned Customers) / Revenue from Existing Customers at the Beginning of the Period x 100

For example, if your revenue from existing customers at the beginning of the period is $100,000, and you lost $10,000 due to churn, but gained $20,000 from upgrades, your revenue from existing customers at the end of the period would be $110,000. Your net dollar retention would be:

Net Dollar Retention = ($110,000 - $10,000) / $100,000 x 100 = 100%

A net dollar retention rate of 100% or higher means that you are retaining all the revenue from your existing customers and gaining additional revenue from upgrades. A rate lower than 100% means that you are losing revenue due to churn, and you need to focus on retaining your customers.

When Is It Valuable To Calculate Net Dollar Retention?

Calculating net dollar retention is valuable for any business that wants to measure its growth and success. It helps you understand how much revenue you are retaining from your existing customers and how much you are losing to churn. It also helps you identify the areas where you need to focus your efforts to retain your customers and increase your revenue.

Net dollar retention is particularly valuable for subscription-based businesses, where customer retention is critical to the success of the business. By calculating net dollar retention, you can identify the customers who are at risk of churning and take proactive measures to retain them. You can also identify the customers who are most likely to upgrade and focus your efforts on upselling them.

How to Calculate Net Dollar Retention

Calculating net dollar retention is a straightforward process that involves collecting data from your existing customers and churned customers. Here are the steps to follow:

1. Collect the revenue data from your existing customers at the beginning of the period.
2. Collect the revenue data from your existing customers at the end of the period.
3. Collect the revenue data from your churned customers during the period.
4. Calculate the net dollar retention using the formula mentioned earlier.

Once you have calculated your net dollar retention, you can use the insights to make data-driven decisions about your business. You can identify the areas where you need to focus your efforts to retain your customers and increase your revenue. You can also identify the customers who are most likely to upgrade and focus your efforts on upselling them.

In conclusion, net dollar retention is a valuable metric for any business that wants to measure its growth and success. By calculating net dollar retention, you can identify the areas where you need to focus your efforts to retain your customers and increase your revenue. It is a straightforward process that involves collecting data from your existing customers and churned customers. Use the insights to make data-driven decisions about your business and stay ahead of the competition.

How Do You Calculate Net Dollar Retention in Insightly

Insightly itself isn’t naturally geared towards letting you calculate complex metrics like Net Dollar Retention. As an alternative, teams typically use products like Arithmix to import data from Insightly 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 Insightly, combine it with data from other systems, and create calculations like Net 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 Net Dollar Retention in Arithmix

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

Arithmix is designed to give you the power to build any calculations you want on top of your Insightly 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.