What is Magic Number?
Sales efficiency: ARR added per dollar of S&M.
How to calculate it
Calculate Magic Number as: Net new ARR / Prior-period S&M spend. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$300k net new ARR / $400k prior-quarter S&M = 0.75, efficient enough to invest more in growth.
Example 2
$300k of net new ARR against $400k of prior-quarter S&M -> a magic number of 0.75, a green light to invest more in growth.
Why it matters
The magic number measures ARR added per dollar of sales and marketing spend and tells you whether to invest more aggressively in growth. A strong magic number means the go-to-market engine converts spend into recurring revenue efficiently. Choosing the wrong spend window (lagging it incorrectly against the ARR it generated) distorts the result.
Benchmark context
Above 0.75 generally supports increasing spend; below about 0.5 suggests fixing efficiency before pouring in more budget.
Common pitfalls
Lagging spend window chosen incorrectly.
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