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.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Net New ARR" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Net New ARR Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Net new ARR: definition, formula, and how to calculate it) for context and common pitfalls.
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.
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 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.