Definition
Net new ARR is the net change in ARR over a period after adding new and expansion ARR and subtracting contraction and churn.
Formula
Net new ARR = new ARR + expansion ARR - contraction ARR - churned ARR
Example
If new ARR is $1.2M, expansion is $0.6M, contraction is $0.2M, and churn is $0.4M, net new ARR = $1.2M + $0.6M - $0.2M - $0.4M = $1.2M.
How to use it
- Use net new ARR for efficiency metrics like burn multiple and magic number.
- Compute it for the same period as burn/spend (often quarterly).
- Segment by channel, plan, and customer size to avoid blended noise.
Common mistakes
- Mixing ARR movements with bookings/cash (different concepts and timing).
- Using inconsistent windows (monthly net new ARR with quarterly burn).
- Counting one-time fees as recurring ARR movements.
Measured as
Net new ARR = new ARR + expansion ARR - contraction ARR - churned ARR
Misused when
- Mixing ARR movements with bookings/cash (different concepts and timing).
- Using inconsistent windows (monthly net new ARR with quarterly burn).
- Counting one-time fees as recurring ARR movements.
Operator takeaway
- Use net new ARR for efficiency metrics like burn multiple and magic number.
- Compute it for the same period as burn/spend (often quarterly).
- Segment by channel, plan, and customer size to avoid blended noise.
- Keep Net New ARR consistent by cohort, segment, and period before you use it as a decision signal in planning or reporting.
- Interpret the metric alongside retention, margin, or payback so one ratio does not hide the real operating trade-off.
Next decision
- Quantify the impact with Net New ARR Calculator if you need to turn the definition into an operating assumption.
- Read Net new ARR: definition, formula, and how to calculate it if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- Net New ARR Calculator: Calculate net new ARR from new, expansion, contraction, and churned ARR movements.
- Burn Multiple Calculator: Calculate burn multiple: net burn / net new ARR (a growth efficiency metric).
- ARR Waterfall Calculator: Build an ARR waterfall: starting ARR + new + expansion - contraction - churn = ending ARR.
- SaaS Magic Number Calculator: Formula, Benchmark, and Example: Calculate SaaS Magic Number using net new ARR and prior-period sales and marketing spend, with formula, benchmark ranges, and example.
Guides
- Net new ARR: definition, formula, and how to calculate it: Net new ARR explained: how to calculate net new ARR from new, expansion, contraction, and churned ARR movements - plus common mistakes.
- Burn multiple: definition, formula, and how to use it: Burn multiple explained: net burn / net new ARR. Learn how to compute it, interpret it, and avoid common mistakes.
- ARR guide: meaning, formula, MRR, bookings, and growth: A practical ARR guide covering meaning, formula, ARR vs MRR, bookings vs cash, net new ARR, waterfalls, and how to use ARR without misleading yourself.
- ARR waterfall: reconcile starting ARR to ending ARR (net new ARR): A practical ARR waterfall guide: starting ARR + new + expansion - contraction - churn = ending ARR, with examples and pitfalls.