What is new ARR?
New ARR, or New Annualized Recurring Revenue, represents the incremental revenue generated from newly acquired customer accounts or from existing customers who have expanded their ARR during a specific period.
Why is it important to measure our new ARR?
Tracking new ARR is crucial for assessing the company's ability to attract and convert new customers. It provides valuable insights into the effectiveness of the sales and marketing efforts in acquiring new business and the performance of account executives in expanding current business. A healthy and increasing new ARR indicates that the company is successfully expanding its customer base and tapping into new market segments. New ARR is also a significant factor in overall revenue growth. By understanding the contribution of new customers and expanding customers to the company's recurring revenue, businesses can set realistic growth targets and align their sales and marketing efforts accordingly.
How is new ARR calculated?
To calculate new ARR, you need to consider the ARR generated from customer accounts that did not have any ARR in the preceding period (the period before the current one) and the ARR generated from existing customers who have expanded their ARR during the current period.