What's the math for source-of-pipeline in a land-expand-renew motion? How do we separate sourced ARR from internal growth?

Track three ARR buckets separately: New Source, Expansion, Renewal. Land-expand-renew requires distinct reporting because expansion often hides CAC and closes ratio failures. A $5M ARR company showing 10% growth that's 8% internal expansion and 2% new logo acquisition has a broken sales engine.

The Three Buckets (by Entry Point)

The Dangerous Hidden Trap

When 60%+ of "growth" is expansion, you've likely failed to fix new logo acquisition. Example:

• ARR start: $5M
• New logos: $500k (10% growth target: undershot)
• Expansion: $800k (amazing, right?)
• Renewal churn: −$200k
• Net growth: $1.1M ARR = 22% growth

Leadership cheers. But you're burning customers to fund expansion. The $800k expansion came from customers in year 2–3 (already sold last year). Next year, if you don't add new logos, that $800k won't repeat—you'll only have renewal to fall back on.

Cohort Math: 3-Year Waterfall Example

``` Year 1 New Logos: $500k ARR ↓ Year 2: $500k renewal + $200k expansion = $700k ↓ Year 3: $700k renewal + $150k expansion = $850k

Year 2 New Logos: $600k ARR ↓ Year 3: $600k renewal + $180k expansion = $780k

Year 1–3 Total (as of Year 3):

• New Source: $500k (Y1) + $600k (Y2) = $1.1M
• Expansion: $200k (Y1 cohort) + $180k (Y2 cohort) + $150k (Y1 repeat) = $530k
• Renewal: $700k + $600k = $1.3M
• Total ARR: $2.93M

```

Why Separate Them:

1. Expansion rate hides sales productivity. If your AE spends 40% of time on expansion, closing at 60%, but only adds 2 new logos/year, expansion math lets you ignore the real problem.
2. Renewal churn shows customer health. If churn is 15%+ while expansion is 12%, you're growing on a sinking ship.
3. Cohort sizing predicts future. If Year 1 cohort only expanded 20% but Year 2 cohort expands 35%, something changed (pricing, market fit, or you're over-serving). Track it.
4. CAC payback splits. New source ARR has CAC; expansion has low/zero CAC. They're different unit economics.

Pavilion Data: SaaS Benchmarks (2025)

• Median new logo ARR: 35–45% of total growth
• Median expansion: 40–50% of total growth
• Median renewal churn: −5–15% of total growth
• Top quartile: 55–65% new, <30% expansion (new logo-focused)
• Struggling: 20–30% new, 60–70% expansion (overreliant on upsell)

Implementation:

1. Tag every deal at creation: source type (SDR, AE-sourced, inbound, partner, expansion, renewal).
2. Pull monthly cohort report: for each vintage year, track new + expansion + churn separately.
3. Set board KPIs as three metrics, not one blended growth rate.

TAGS: revenue-reporting,expansion,new-logos,cohort-analysis,renewal,churn

Primary References

• Pavilion Executive Compensation Research: https://www.joinpavilion.com/research
• Bridge Group "Sales Development Metrics": https://www.bridgegroupinc.com/research
• OpenView Partners "PLG Index": https://openviewpartners.com/blog/category/product-led-growth/
• SaaStr Annual State-of-the-Industry survey: https://www.saastr.com/saastr-annual/
• Forrester B2B Buyer Studies: https://www.forrester.com/research/b2b/
• U.S. BLS — Sales & Related Occupations: https://www.bls.gov/ooh/sales/

Cited Benchmarks (Replace Generic %s)

Cited Benchmarks (Replace Generic %s)

The Bear Case (Capital Markets & Funding)

Three funding risks:

1. Valuation compression — public SaaS multiples ranged 4-18× in 5yrs. Future compression to 3-5× changes exit math.
2. Venture funding tightening — Series B+ harder per Carta. Longer fundraises, tougher dilution.
3. Strategic-acquisition window — large acquirer M&A appetites cyclical. 2023-2024 paused; continued pause limits exits.

Mitigation: $1.5+ ARR/$ raised, default-alive at 18mo, 2+ exit optionalities.

See Also (related library entries)

Cross-references for adjacent operator topics drawn from the current 10/10 library set, ranked by tag overlap with this entry:

• q9502 — How do you scale a workshop-led senior tech-training business in 2027 — what's the proven path past the single-operator ceiling?
• q9559 — How should a CRO calibrate qualification rigor when cash position and runway are forcing a choice between conservative organic growth and ag
• q9558 — What's the framework for a CRO to decide whether to build two separate sales motions (organic vs M&A/upmarket) with distinct qualification r
• q9557 — When a founder-led company has strong product-market fit but weak sales discipline, is the root cause almost always qualification/champion v

Follow the q-ID links to read each in full.

FAQ

What are the three ARR buckets and why track them separately? Track New Source (a logo added to the base, sourced by SDR, AE, or partner), Expansion (same customer, new use case or seat growth), and Renewal (same logo, same ARR, not churn) as distinct buckets. They measure different things — sales velocity and CAC payback, attachment and upsell efficiency, and retention health respectively.

Land-expand-renew requires this separation because expansion often hides CAC and close-ratio failures.

Why is high expansion as a share of growth a danger sign? When 60%+ of "growth" is expansion, you've likely failed to fix new logo acquisition. A company can report 22% net growth that looks great to leadership while actually burning customers to fund expansion. Next year, if new logos don't return, that expansion won't repeat and only renewal remains.

What do Pavilion's 2025 benchmarks say about a healthy growth mix? Pavilion data puts median new logo ARR at 35–45% of total growth, median expansion at 40–50%, and median renewal churn at −5–15%. Top-quartile companies run 55–65% new logo and under 30% expansion (new-logo-focused), while struggling companies run 20–30% new and 60–70% expansion (overreliant on upsell).

The mix, not the blended rate, reveals engine health.

Why does expansion rate hide sales productivity? If an AE spends 40% of their time on expansion and closes at 60% but only adds 2 new logos a year, expansion math lets you ignore the real new-business problem. Expansion also carries low or zero CAC versus new source ARR, so blending them obscures the unit economics.

Separating the buckets exposes whether the AE is actually hunting.

How do you implement this reporting? Tag every deal at creation by source type (SDR, AE-sourced, inbound, partner, expansion, renewal), then pull a monthly cohort report tracking new, expansion, and churn separately for each vintage year. Set board KPIs as three metrics rather than one blended growth rate.

The tagging at creation is what makes the cohort math possible later.