What is net new ARR?
Net new ARR is the change in annual recurring revenue over a period, after every movement: new business and expansion add to it; churn and contraction subtract. It is the dollar figure behind your growth rate.
It is also the denominator for two efficiency metrics. The burn multiple and the magic number both divide spend by net new ARR, which is why it is worth getting right.
The net new ARR formula.
From components: net new ARR = new ARR plus expansion ARR minus churned ARR minus contraction ARR. From the simpler view: net new ARR = ending ARR minus starting ARR. Both should land on the same number.
Use the same period for every input. Mixing a quarter of new business with a year of churn distorts it.
A worked example.
In a quarter you add 300,000 dollars of new ARR and 100,000 of expansion, and lose 50,000 to churn and 20,000 to contraction. Net new ARR is 400,000 minus 70,000, which is 330,000 dollars.
What is a good net new ARR?
There is no benchmark for the raw number, since it scales with company size. What matters is the trend and the efficiency behind it. Growing net new ARR quarter over quarter is the goal; doing it without burning disproportionately is the test.
Net new ARR feeds the burn multiple and the SaaS magic number. The same 330,000 dollars looks very different on a 300,000 dollar burn than on a 2 million dollar one.
How to grow your net new ARR.
Lift any of the four parts: more new business, more expansion, less churn, less contraction. Expansion and retention are usually the cheaper levers, because they build on customers you already have.
On the new-business side, a compounding channel adds ARR without adding spend in step. See the Workwize numbers, where organic became the lowest-cost source of new pipeline.