What is Magic Number?
Definition
Magic Number measures sales efficiency by comparing net new ARR to sales & marketing spend. It shows how much ARR you generate per dollar spent.
Formula
Magic Number = (Current Quarter Net New ARR × 4) / Prior Quarter S&M Spend
Example:
Q2 Net New ARR: $250K | Q1 S&M: $1M
Magic Number = ($250K × 4) / $1M = 1.0
Benchmarks
Above 1.0 - Excellent, scale aggressively
0.75 - 1.0 - Good, continue investing
0.5 - 0.75 - Acceptable
Below 0.5 - Poor efficiency