Metrics
Magic Number
Quick definition
Sales efficiency metric — new ARR per dollar of S&M spend.
Magic Number = (Quarterly ARR growth × 4) / Prior-quarter S&M spend. Above 1.0 is strong, above 0.75 is healthy, below 0.5 means your GTM isn't returning efficient growth.
Related metrics terms
ARR (Annual Recurring Revenue)
Annualized value of your subscription revenue at a point in time.
MRR (Monthly Recurring Revenue)
Monthly equivalent of ARR, useful for month-over-month tracking.
Net Revenue Retention (NRR)
Revenue from your existing customer base 12 months later, including expansion and churn.
Gross Revenue Retention (GRR)
NRR without upsell — what you keep before expansion.
Frequently asked questions
- What is Magic Number?
- Magic Number = (Quarterly ARR growth × 4) / Prior-quarter S&M spend. Above 1.0 is strong, above 0.75 is healthy, below 0.5 means your GTM isn't returning efficient growth.
- Why is Magic Number important for startups?
- Magic Number is a metrics concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does Magic Number belong to?
- Magic Number is a Metrics term in the StartupCFO finance glossary — alongside other metrics concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about Magic Number?
- Beyond this definition, see the related metrics terms below, or explore StartupCFO's insights and tools that put Magic Number in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
Got a finance question that needs more than a definition?
Talk to a real CFO. 30 minutes, no contract, free.
