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Gross New ARR comes from new customers who start a paid subscription to your product or service for the first time.
Gross New is crucial in the ARR Build for two reasons:
In the early days at Snowflake, Brad Floering, the company’s Head of FP&A, realized the accuracy of his topline forecast largely depended on his team’s ability to predict the distribution of New vs. Existing customers and the expected usage behavior for those newly acquired customers.
Because this segment of the business was so important in getting the overall forecast right, the company eventually had to create an entire forecast model just for new customers, which they referred to as the Cold Start model.
Dialing in the performance of Gross New ARR requires a deep understanding of your company’s Ideal Customer Profile (ICP). Your ICP is a generalized representation of types of people or companies you want to sell to (and hopefully are also building for). You’ll want to be clear on what pain points your product solves for them, how you differentiate your solution from the competition, and how you price your product based on that.
Operationalizing this means your sales, marketing, product, and growth teams must be aligned and in lockstep with your go-to-market strategy.
You can help them in this journey by providing clear and concise reporting on the upstream metrics that feed into Gross New ARR, such as top-of-funnel reporting and segmenting performance by firmographic attributes (e.g., geography, company size, buyer persona).
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