ARR says how big you are. ARR growth is how fast you’re getting bigger -- and fast is worth more to investors than slow. NNARR growth is the same, but times ten.

In a late-2020 article, Scale’s Rory O’Driscoll zeroed in on the importance of Net New ARR in annual plans for 2021, saying:

Net New ARR is a very leveraged number and the growth rate of NNARR is an even more leveraged metric. Net New ARR captures all the “work” taking place. New customer additions, upsells, and churn are all reflected in this number without the smoothing out denominator effect that you see in growth rates of Total ARR. NNARR is like an amplifier in a power circuit, making painfully clear the impact of deceleration in a way that a Closing ARR growth rate does not.

Let’s unpack this a little. Basically, NNARR is important because it rolls up a lot about your operations into a single number. It is also a leading indicator of future ARR growth. In a healthy business, NNARR growth accelerates as much or more than ARR itself.

For investors, strong NNARR growth signals a bunch of good things like go-to-market maturity, product-market fit, and happy customers all rolled up in one.

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