Metrics
Sales Efficiency / Magic Number
Quick definition
Quarterly New ARR ÷ Prior Quarter's Sales & Marketing Spend. >1 means you're winning more revenue than you're spending to win it.
Magic Number = (Current Q Net New ARR × 4) / Prior Q Sales & Marketing Spend. >1.5 is excellent (lots of room to invest more), 0.75-1.5 is healthy, <0.5 means stop spending and fix the engine. Computed quarterly. Measures the return on sales and marketing investment one quarter at a time. Watched closely by growth-stage investors.
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 Sales Efficiency / Magic Number?
- Magic Number = (Current Q Net New ARR × 4) / Prior Q Sales & Marketing Spend. >1.5 is excellent (lots of room to invest more), 0.75-1.5 is healthy, <0.5 means stop spending and fix the engine. Computed quarterly. Measures the return on sales and marketing investment one quarter at a time. Watched closely by growth-stage investors.
- Why is Sales Efficiency / Magic Number important for startups?
- Sales Efficiency / 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 Sales Efficiency / Magic Number belong to?
- Sales Efficiency / 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 Sales Efficiency / Magic Number?
- Beyond this definition, see the related metrics terms below, or explore StartupCFO's insights and tools that put Sales Efficiency / Magic Number in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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