Magic Number

MetricRevOps

Net new ARR in a quarter divided by the prior quarter's sales and marketing spend. Measures go-to-market efficiency (above 0.75 is strong).

The Magic Number is a SaaS efficiency metric that shows how much net new ARR is generated for every dollar spent on sales and marketing.

Formula

Magic Number = (Current Quarter ARR − Previous Quarter ARR) / Previous Quarter Sales & Marketing Spend

Example

If ARR grows from $20M to $22M and last quarter’s S&M spend was $2.5M:

Magic Number = $2M / $2.5M = 0.80

How to interpret it

  • > 1.0 – Very efficient: each $1 in S&M generates >$1 in ARR. Invest more aggressively.
  • 0.75 – 1.0 – Healthy: solid returns; reasonable to increase investment.
  • 0.50 – 0.75 – Moderate: acceptable, but improve efficiency before scaling.
  • < 0.50 – Concerning: GTM spend is not converting well; fix before scaling.

Magic Number vs. CAC Payback

  • CAC Payback: measures how long it takes to recoup the acquisition cost of a single customer.
  • Magic Number: measures the aggregate return on total S&M investment.

The Magic Number is simpler and useful for quick benchmarking of overall GTM efficiency.

RevOps usage

RevOps teams track the Magic Number by quarter, segment, and channel to see where incremental GTM investment yields the best returns, and then use this to guide budget allocation.

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