How To Calculate Net Dollar Retention in Sageworks | Arithmix

Calculating net dollar retention is an important metric for any business looking to understand the health of its customer base. It allows you to measure the revenue retained from existing customers over a given period of time, and is a key indicator of customer loyalty and satisfaction. In this article, we'll explore what net dollar retention is, when it's valuable to calculate, and how you can calculate it using Sageworks or other tools.

What Is Net Dollar Retention?

Net dollar retention is a measure of how much revenue a business retains from its existing customers over a given period of time, typically a year. It takes into account both the revenue generated from existing customers who continue to purchase from the business, as well as any revenue lost due to customer churn or downgrades. The formula for calculating net dollar retention is:

Net Dollar Retention = (Revenue from Existing Customers at End of Period - Revenue from Churned or Downgraded Customers) / Revenue from Existing Customers at Start of Period

For example, if a business had $1 million in revenue from existing customers at the start of the year, and $1.2 million in revenue from those same customers at the end of the year, but lost $200,000 in revenue from churned or downgraded customers, the net dollar retention rate would be:

Net Dollar Retention = ($1.2 million - $200,000) / $1 million = 1.0 or 100%

This means that the business retained 100% of its revenue from existing customers over the course of the year, even after accounting for customer churn and downgrades.

When Is It Valuable To Calculate Net Dollar Retention?

Net dollar retention is a valuable metric for any business that relies on recurring revenue from its customer base, such as subscription-based businesses or SaaS companies. It allows you to measure the effectiveness of your customer retention efforts and identify areas where you may need to improve. A high net dollar retention rate indicates that your customers are satisfied with your product or service and are likely to continue doing business with you in the future. On the other hand, a low net dollar retention rate may indicate that you need to invest more in customer retention efforts or improve the quality of your product or service.

How To Calculate Net Dollar Retention Using Sageworks

Sageworks is a financial analysis software that can help you calculate net dollar retention for your business. To do so, you'll need to follow these steps:

1. Export your customer data from your CRM or billing system into a spreadsheet.
2. Import the spreadsheet into Sageworks and map the relevant fields.
3. Run a report to calculate the revenue from existing customers at the start and end of the period, as well as the revenue lost due to churn or downgrades.
4. Use the formula above to calculate the net dollar retention rate.

Alternatively, you can use other financial analysis tools or even a simple spreadsheet to calculate net dollar retention. The key is to ensure that you have accurate data on your existing customers and their revenue over a given period of time.

In conclusion, net dollar retention is a valuable metric for any business looking to understand the health of its customer base. By calculating this metric, you can identify areas where you may need to improve your customer retention efforts and ensure that your business is on track for long-term success.

How Do You Calculate Net Dollar Retention in Sageworks

Sageworks 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 Sageworks 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 Sageworks, 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 Sageworks 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 Sageworks 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.