Glossary term
Magic Number
The ratio of new ARR to prior-period sales and marketing spend; above 0.75 indicates efficient, repeatable growth.
The Magic Number is the ratio of net new ARR in a period to the sales and marketing spend of the prior period, measuring how efficiently go-to-market investment converts into recurring revenue. A reading above 0.75 indicates efficient, repeatable growth worth funding, while below 0.5 suggests the growth engine is sputtering. It is a sister metric to sales efficiency and a quick screen for whether to step on the gas. See Sales Efficiency and SaaSpocalypse 101.