ARR expansion vs existing

What’s this and how does it benefit your business?

This report is your best bet to keep tabs on your annual recurring revenue (ARR) at all times. But what is ARR, and why is it important?

ARR was born for SaaS businesses and indicates how much recurring, predictable revenue you can expect from your subscriptions in a year. Let’s say this month you sold 1,000 yearly subscriptions for your service. Each subscription has a fixed price of $50 per month.

Now, if we do a bit of math, your ARR for this month is $600,000 ($50 x 12 months x 1,000 people), provided that no one cancels your subscription. If someone does, the money you lose is called ARR churn, but that’s a story for another day ;)

So, why is it so important to track ARR? Because it forecasts with precision how much you should earn in the upcoming year. Who wouldn’t want to know that?

But let’s take a step forward. You have both new ARR and expansion ARR. New ARR comes from new subscribers, while expansion ARR comes from existing customers who upgrade their plan, purchase add-ons, reactivate their canceled subscription…

It’s important to keep up with both metrics. You don’t want to only focus on new customers, because otherwise you’ll lose the opportunity to make your existing customers spend more with add-ons, upgrades, and so on.

On the other hand, you can’t only focus on your existing clients without trying to get new subscriptions. That’s why our report compares new and expansion ARR, so you can see the current trends and take action to improve what can be improved. 

If you see you only get revenue from new subscribers, you can try promoting add-on features. Or, why don’t you launch a special offer on upgrades for existing customers? There are many ways to increase your ARR if you have access to the right data!