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.