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 Spend

Worked example

Net New ARR $300,000 this quarter, prior-quarter S&M spend $400,000 → Magic Number = 0.75.

Illustrative comparisons

Sales efficiency

These unsourced ranges are illustrative scenarios, not measured industry benchmarks, percentiles or recommended targets. Their qualitative labels are editorial interpretations. Compare your own cohorts using the same segment, period, currency and measurement basis.

Strong

> 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.

Track Sales Efficiency in FlowMRR