Add-On ARR
Growth
Industry:
SaaS
Short Definition
Add-on ARR is the increase in annual recurring revenue from an existing customer buying more of the same thing—e.g., more seats/units, a higher committed minimum, or a price-only increase—that became effective (go-live) this period. (Signed-not-live sits in CARR until start.)
Short Definition
Add-on ARR is the increase in annual recurring revenue from an existing customer buying more of the same thing—e.g., more seats/units, a higher committed minimum, or a price-only increase—that became effective (go-live) this period. (Signed-not-live sits in CARR until start.)
Short Definition
Add-on ARR is the increase in annual recurring revenue from an existing customer buying more of the same thing—e.g., more seats/units, a higher committed minimum, or a price-only increase—that became effective (go-live) this period. (Signed-not-live sits in CARR until start.)
Why it matters for Investors
Base-driven growth: Shows adoption/utilization inside the customer base.
Monetization signal: Highlights price and packaging levers working (minimums, true-ups, escalators).
Net Revenue Retention lift: Add-ons help push Net Revenue Retention > 100% if they outpace logo churn/contraction.
Why it matters for Investors
Base-driven growth: Shows adoption/utilization inside the customer base.
Monetization signal: Highlights price and packaging levers working (minimums, true-ups, escalators).
Net Revenue Retention lift: Add-ons help push Net Revenue Retention > 100% if they outpace logo churn/contraction.
Why it matters for Investors
Base-driven growth: Shows adoption/utilization inside the customer base.
Monetization signal: Highlights price and packaging levers working (minimums, true-ups, escalators).
Net Revenue Retention lift: Add-ons help push Net Revenue Retention > 100% if they outpace logo churn/contraction.
Formula
Practical considerations -
Scope: Existing customers only.
Include: More seats/units, higher annual minimum commit, price-only increase (same product/tier).
Timing: Count on the effective (go-live) date; signed-for-later → CARR.
Ramps: Pre-scheduled quantity/minimum/price step-ups count when the step starts (Add-on ramp).
Exclude: New modules/products (Cross-sell), higher tier/edition (Upsell), and uncommitted/overage usage (that’s revenue, not ARR).
Mixed change? Split once: Module added → Cross-sell; seats/minimum/price change → Add-on.
Formula
Practical considerations -
Scope: Existing customers only.
Include: More seats/units, higher annual minimum commit, price-only increase (same product/tier).
Timing: Count on the effective (go-live) date; signed-for-later → CARR.
Ramps: Pre-scheduled quantity/minimum/price step-ups count when the step starts (Add-on ramp).
Exclude: New modules/products (Cross-sell), higher tier/edition (Upsell), and uncommitted/overage usage (that’s revenue, not ARR).
Mixed change? Split once: Module added → Cross-sell; seats/minimum/price change → Add-on.
Formula
Practical considerations -
Scope: Existing customers only.
Include: More seats/units, higher annual minimum commit, price-only increase (same product/tier).
Timing: Count on the effective (go-live) date; signed-for-later → CARR.
Ramps: Pre-scheduled quantity/minimum/price step-ups count when the step starts (Add-on ramp).
Exclude: New modules/products (Cross-sell), higher tier/edition (Upsell), and uncommitted/overage usage (that’s revenue, not ARR).
Mixed change? Split once: Module added → Cross-sell; seats/minimum/price change → Add-on.
Worked Example
Starting ARR (Feb 28): $1,200,000
Period: March (snapshot Mar 31)
Account | Event | Effective by Mar 31? | Account ARR @ Mar-31 ($) | Δ ARR in March ($) | Category | Notes |
|---|---|---|---|---|---|---|
A | New logo, annual | Yes | $24,000 | +$24,000 | New Logo | Not Add-on |
B | New logo, annual | No | $0 | $0 | Booking / CARR | Signed, starts next month |
C | +50 seats @ $200/seat/yr (prior $50,000) on Mar 15 | Yes | $60,000 ($50,000 → $60,000) | +$10,000 | Expansion — Add-on | More seats |
D | Cancellation effective Mar 31 | Yes | $0 | −$40,000 | Logo Churn | Account to $0, included in Churn |
E | Contracted step-up minimum $20,000 → $35,000 on Mar 1 | Yes | $35,000 | +$15,000 | Expansion — Add-on (ramp) | Pre-agreed minimum increase |
F | Price-only increase: 100 seats $120 → $130 on Mar 20 | Yes | $13,000 ($12,000 → $13,000) | +$1,000 | Expansion — Add-on (price) | Same tier/qty |
G | Add Analytics module +$7,000 on Mar 25 (prior $30,000) | Yes | $37,000 ($30,000 → $37,000) | +$7,000 | Expansion — Cross-sell | Not Add-on |
Add-on ARR (March): $26,000 = $10,000 (C) + $15,000 (E) + $1,000 (F)
ARR Bridge (March):
New Logo ARR: +$24,000 (A)
Expansion ARR: +$33,000 = Add-on $26,000 (C+E+F) + Cross-sell $7,000 (G)
Contraction ARR: $0
Logo Churn ARR: −$40,000 (D)
Net New ARR: $24,000 + $33,000 − $40,000 = +$17,000
Ending ARR (Mar 31): $1,200,000 + $17,000 = $1,217,000
Notes:
Add-on = more of the same product (quantity/minimum/price).
G is Cross-sell (new module), not Add-on.
Ramped step-ups (E) count when they start.
Signed-not-live stays in CARR until effective.
Worked Example
Starting ARR (Feb 28): $1,200,000
Period: March (snapshot Mar 31)
Account | Event | Effective by Mar 31? | Account ARR @ Mar-31 ($) | Δ ARR in March ($) | Category | Notes |
|---|---|---|---|---|---|---|
A | New logo, annual | Yes | $24,000 | +$24,000 | New Logo | Not Add-on |
B | New logo, annual | No | $0 | $0 | Booking / CARR | Signed, starts next month |
C | +50 seats @ $200/seat/yr (prior $50,000) on Mar 15 | Yes | $60,000 ($50,000 → $60,000) | +$10,000 | Expansion — Add-on | More seats |
D | Cancellation effective Mar 31 | Yes | $0 | −$40,000 | Logo Churn | Account to $0, included in Churn |
E | Contracted step-up minimum $20,000 → $35,000 on Mar 1 | Yes | $35,000 | +$15,000 | Expansion — Add-on (ramp) | Pre-agreed minimum increase |
F | Price-only increase: 100 seats $120 → $130 on Mar 20 | Yes | $13,000 ($12,000 → $13,000) | +$1,000 | Expansion — Add-on (price) | Same tier/qty |
G | Add Analytics module +$7,000 on Mar 25 (prior $30,000) | Yes | $37,000 ($30,000 → $37,000) | +$7,000 | Expansion — Cross-sell | Not Add-on |
Add-on ARR (March): $26,000 = $10,000 (C) + $15,000 (E) + $1,000 (F)
ARR Bridge (March):
New Logo ARR: +$24,000 (A)
Expansion ARR: +$33,000 = Add-on $26,000 (C+E+F) + Cross-sell $7,000 (G)
Contraction ARR: $0
Logo Churn ARR: −$40,000 (D)
Net New ARR: $24,000 + $33,000 − $40,000 = +$17,000
Ending ARR (Mar 31): $1,200,000 + $17,000 = $1,217,000
Notes:
Add-on = more of the same product (quantity/minimum/price).
G is Cross-sell (new module), not Add-on.
Ramped step-ups (E) count when they start.
Signed-not-live stays in CARR until effective.
Worked Example
Starting ARR (Feb 28): $1,200,000
Period: March (snapshot Mar 31)
Account | Event | Effective by Mar 31? | Account ARR @ Mar-31 ($) | Δ ARR in March ($) | Category | Notes |
|---|---|---|---|---|---|---|
A | New logo, annual | Yes | $24,000 | +$24,000 | New Logo | Not Add-on |
B | New logo, annual | No | $0 | $0 | Booking / CARR | Signed, starts next month |
C | +50 seats @ $200/seat/yr (prior $50,000) on Mar 15 | Yes | $60,000 ($50,000 → $60,000) | +$10,000 | Expansion — Add-on | More seats |
D | Cancellation effective Mar 31 | Yes | $0 | −$40,000 | Logo Churn | Account to $0, included in Churn |
E | Contracted step-up minimum $20,000 → $35,000 on Mar 1 | Yes | $35,000 | +$15,000 | Expansion — Add-on (ramp) | Pre-agreed minimum increase |
F | Price-only increase: 100 seats $120 → $130 on Mar 20 | Yes | $13,000 ($12,000 → $13,000) | +$1,000 | Expansion — Add-on (price) | Same tier/qty |
G | Add Analytics module +$7,000 on Mar 25 (prior $30,000) | Yes | $37,000 ($30,000 → $37,000) | +$7,000 | Expansion — Cross-sell | Not Add-on |
Add-on ARR (March): $26,000 = $10,000 (C) + $15,000 (E) + $1,000 (F)
ARR Bridge (March):
New Logo ARR: +$24,000 (A)
Expansion ARR: +$33,000 = Add-on $26,000 (C+E+F) + Cross-sell $7,000 (G)
Contraction ARR: $0
Logo Churn ARR: −$40,000 (D)
Net New ARR: $24,000 + $33,000 − $40,000 = +$17,000
Ending ARR (Mar 31): $1,200,000 + $17,000 = $1,217,000
Notes:
Add-on = more of the same product (quantity/minimum/price).
G is Cross-sell (new module), not Add-on.
Ramped step-ups (E) count when they start.
Signed-not-live stays in CARR until effective.
Best Practices
Tag the driver: Seats/units vs. minimum vs. price-only; report each line.
Watch ramps & escalators: Keep a simple CARR list of future-dated add-ons and check they went live.
Segment: By customer size, cohort, and product to see where add-ons land best.
Reconcile monthly: Tie your add-on totals to the ARR bridge and contract change log.
Guardrails: Use clear rules for price increases/minimum floors; avoid permanent discounts—prefer time-boxed credits.
Best Practices
Tag the driver: Seats/units vs. minimum vs. price-only; report each line.
Watch ramps & escalators: Keep a simple CARR list of future-dated add-ons and check they went live.
Segment: By customer size, cohort, and product to see where add-ons land best.
Reconcile monthly: Tie your add-on totals to the ARR bridge and contract change log.
Guardrails: Use clear rules for price increases/minimum floors; avoid permanent discounts—prefer time-boxed credits.
Best Practices
Tag the driver: Seats/units vs. minimum vs. price-only; report each line.
Watch ramps & escalators: Keep a simple CARR list of future-dated add-ons and check they went live.
Segment: By customer size, cohort, and product to see where add-ons land best.
Reconcile monthly: Tie your add-on totals to the ARR bridge and contract change log.
Guardrails: Use clear rules for price increases/minimum floors; avoid permanent discounts—prefer time-boxed credits.
FAQs
Add-on vs Upsell vs Cross-sell?
Add-on: more seats/units, higher minimum, or price-only increase (same product/tier). Upsell: move to a higher tier/edition. Cross-sell: buy a new paid module/product.When do we count it?
On the effective (go-live) date—never when just signed.Do price-only increases count?
Yes—those are Add-on (price).Does uncommitted usage count?
No—pure overage without a higher commitment is revenue, not ARR.Can Add-on ARR be negative?
No. Reductions are Contraction (Down-sell or Reduction), not negative Add-on.
FAQs
Add-on vs Upsell vs Cross-sell?
Add-on: more seats/units, higher minimum, or price-only increase (same product/tier). Upsell: move to a higher tier/edition. Cross-sell: buy a new paid module/product.When do we count it?
On the effective (go-live) date—never when just signed.Do price-only increases count?
Yes—those are Add-on (price).Does uncommitted usage count?
No—pure overage without a higher commitment is revenue, not ARR.Can Add-on ARR be negative?
No. Reductions are Contraction (Down-sell or Reduction), not negative Add-on.
FAQs
Add-on vs Upsell vs Cross-sell?
Add-on: more seats/units, higher minimum, or price-only increase (same product/tier). Upsell: move to a higher tier/edition. Cross-sell: buy a new paid module/product.When do we count it?
On the effective (go-live) date—never when just signed.Do price-only increases count?
Yes—those are Add-on (price).Does uncommitted usage count?
No—pure overage without a higher commitment is revenue, not ARR.Can Add-on ARR be negative?
No. Reductions are Contraction (Down-sell or Reduction), not negative Add-on.
Related Metrics
Commonly mistaken for:
Upsell ARR (ARR from tier upgrades, not optional features)
Cross-sell ARR (ARR from distinct products, not add-ons)
New Logo ARR (ARR from new customers, not existing ones)
Related Metrics
Commonly mistaken for:
Upsell ARR (ARR from tier upgrades, not optional features)
Cross-sell ARR (ARR from distinct products, not add-ons)
New Logo ARR (ARR from new customers, not existing ones)
Related Metrics
Commonly mistaken for:
Upsell ARR (ARR from tier upgrades, not optional features)
Cross-sell ARR (ARR from distinct products, not add-ons)
New Logo ARR (ARR from new customers, not existing ones)
Source of:
Index