Net new ARR

What is net new ARR?

Net new ARR represents the overall change in Annualized Recurring Revenue during a specific period, accounting for the growth from newly acquired customer accounts (new logo) and from existing customers who have expanded their ARR (expansion), as well as any losses due to customer contractions (contraction) and churned customers (churn).

Why is it important to measure our net new ARR?

Measuring Net new ARR is vital for gaining a comprehensive view of the company's revenue performance and growth dynamics. It provides a clear picture of how much recurring revenue the company has gained or lost during the period, considering both new business and changes in existing customer accounts. A positive net new ARR signifies that the company is adding more revenue than it is losing, indicating healthy growth and a strong revenue engine. Tracking the breakdown of net new ARR into New Logo, Expansion, Contraction, and Churn categories allows businesses to identify specific drivers of revenue changes. This insight is instrumental in making strategic decisions, such as refining customer acquisition strategies, optimizing upselling and cross-selling efforts, addressing customer retention challenges, and improving customer success initiatives. Ultimately, by monitoring net new ARR over time, businesses can evaluate the effectiveness of their revenue-generating strategies and align their sales, marketing, and customer success efforts to achieve sustainable growth.

How is net new ARR calculated?

Net new ARR is calculated by considering the changes in ARR across different customer categories during the specific period.