Magic Number

Net new ARR in a quarter divided by sales and marketing spend in the quarter before: how much annual recurring revenue each dollar of go-to-market spend produced. Above about 0.75 the engine is efficient enough to feed with more spend; below about 0.5 the company should fix its sales motion before it hires. The whole-engine cousin of CAC payback, which is per customer.

Where Magic Number comes up

SaaS Operating Models: ARR, Sales Capacity, Billings and the Metrics That FollowA subscription business is a stock moved by flows, sold by a team with a capacity, and paid for before it is delivered.Read the guide — 11 min

Keep reading

SaaS operating model guide

Related Technology terms

LTV to CAC CAC Payback Net Revenue Retention (NRR)ARR (Annual Recurring Revenue)

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