Definition
Net new ARR is the net change in ARR for a period after adding new and expansion ARR and subtracting contraction and churned ARR. It's a core input to burn multiple and other SaaS efficiency metrics.
Formula
Net new ARR = new ARR + expansion ARR - contraction ARR - churned ARR
How to calculate net new ARR
- Measure new ARR from customers acquired in the period (annualized recurring run-rate).
- Measure expansion ARR from existing customers (upsells, seats, add-ons).
- Measure contraction ARR (downgrades) and churned ARR (cancellations).
- Apply the formula and keep the definition consistent across months/quarters.
Net new ARR vs growth rate
- Net new ARR is a dollar amount (ARR).
- ARR growth rate is net new ARR / starting ARR for the period.
- Use growth rate for comparisons; use net new ARR for planning and efficiency metrics.
Reconciliation checklist
- Starting ARR + net movements equals ending ARR for the same period.
- Separate reactivations and price increases from expansion.
- Normalize annual contracts to ARR, not billings.
- Review net new ARR by segment to spot hidden churn.
Common mistakes
- Mixing bookings/cash with ARR movements (different timing and definitions).
- Using inconsistent windows (monthly net new ARR with quarterly burn).
- Including one-time fees/services in ARR movements.