Net new ARR (gross vs net)
The raw growth engine that feeds the efficiency ratios.
- Formula
- New + Expansion - Contraction - Churn ARR in period (track gross-new and net separately)
- Unit
- $
- Models
- SaaS, Usage-based, Subscription
No public benchmark exists for this metric yet. This is where Omega Point's proprietary data will fill in.
What it is
Net New ARR is the change in total ARR over a period, decomposed into its signed components: new logo ARR added, expansion ARR from existing customers, contraction ARR from downgrades, and churned ARR from cancellations. Gross New ARR is new + expansion only (inflows). Net New ARR = New + Expansion − Contraction − Churn.
How to calculate it
Start with ARR at the beginning of the period. Add ARR from new customers signed in the period. Add ARR from existing customers who upgraded or expanded. Subtract ARR lost to downgrades (contraction). Subtract ARR from customers who cancelled entirely (churn). The result is Net New ARR. Track gross new and net separately so you can see whether growth is coming from acquisition, expansion, or both — and where the drag is coming from.
Why it matters
Net New ARR is the direct input to the magic number (net new ARR ÷ S&M spend) and burn multiple (net burn ÷ net new ARR). Consistent quarter-over-quarter net-new-ARR velocity — even at a steady absolute level — is one of the strongest product-market fit signals identified in the Iconiq Growth framework. Decomposing it into gross vs. net reveals the health of the growth engine: a business adding gross ARR but posting flat or negative net ARR has a retention problem masking acquisition success.
How to read it
There is no public benchmark for net new ARR in absolute terms — it scales with company size, stage, and market. The meaningful benchmarks are derived metrics: the magic number (above 0.75 is generally efficient; above 1.0 is strong) and burn multiple (below 1.0 is efficient). For net new ARR itself, the primary signal is QoQ momentum — is it accelerating, steady, or decelerating? — and the gross-to-net ratio, which reveals the weight of contraction and churn. Compare against your own plan and the implied trajectory from your efficiency ratios. Omega Point does not emit an estimate band here; no absolute figure is defensible without knowing stage and scale.