New ARR

What is New ARR?

New Annualized Recurring Revenue (New ARR) is a critical metric that represents the incremental revenue generated from two key sources: newly acquired customer accounts and the additional revenue from existing customers who have expanded their ARR during a specific period. It's a composite metric that combines revenue from fresh market penetrations and expansions within the current customer base.

The Importance of Measuring New ARR

Measuring New ARR is vital for several reasons:

• Growth Indicator: It's a direct measure of a company's success in attracting new customers and expanding business with existing clients.
• Sales and Marketing Effectiveness: New ARR provides insights into the effectiveness of sales and marketing strategies in acquiring new business and account executives' performance in growing current business.
• Market Expansion Insights: A robust and growing New ARR suggests successful market penetration and the ability to tap into new segments.
• Revenue Growth Projection: Understanding the contribution of new and expanding customers to recurring revenue allows businesses to set realistic growth targets and fine-tune their sales and marketing strategies accordingly.

How is New ARR Calculated?

The calculation of New ARR involves two main components:

• New Logo ARR: Revenue from customer accounts that were not contributing to ARR in the preceding period.
• Expansion ARR: Additional revenue from existing customers who have expanded their ARR during the current period.

Formula

New ARR = New logo ARR + Expansion ARR In summary, New ARR is a comprehensive metric that reflects a company's growth dynamics and its ability to both attract new customers and increase business with existing ones. It's a crucial indicator for assessing overall business health and strategic planning in the SaaS industry.