Net dollar retention measures growth by analyzing customer cohort revenue over time. A net dollar retention above 100% indicates that the revenue from existing customers is increasing, even after accounting for losses from cancellations. For instance, if a company initially earns $100,000 monthly from 10 customers but later faces cancellations offset by upselling and increased usage from others, the final revenue could rise to $110,000. This reflects a healthy customer strategy where upsells outpace losses. Conversely, a net dollar retention below 100% suggests a declining revenue pool, necessitating efforts to attract new customers to compensate for the losses.