Unit economicsMetric 18 of 35
SaaS Magic Number
Sales efficiency: how much recurring revenue last quarter's spend created.
A sales-efficiency ratio that compares new recurring revenue generated this quarter with the sales and marketing spend that created it, usually from the previous quarter to account for pipeline lag.
Formula
Magic Number = Net New ARR in Quarter ÷ Prior Quarter Sales & Marketing SpendWorked example
Net New ARR $300,000 this quarter, prior-quarter S&M spend $400,000 → Magic Number = 0.75.
Benchmark
Sales efficiencyStrong
> 1.0
Good
0.75–1.0
Weak
< 0.5
Why it matters
Magic Number tells you whether additional go-to-market spend should be scaled or fixed first. A number near 1 means each dollar of S&M is creating roughly one dollar of annual recurring revenue. Below 0.5, the acquisition engine is inefficient; above 1, the motion may be ready for more investment.
Common mistakes
- Using same-quarter spend for long sales cycles, which mismatches cost and revenue timing.
- Using gross ARR instead of net new ARR, which hides churn drag.
- Applying enterprise benchmarks to self-serve PLG without accounting for sales-cycle differences.
Tracked in FlowMRR
Not tracked — needs your S&M spend; pair it with Dashboard → Net New MRR.