Magic Number

What is the Magic Number?

The Magic Number measures sales and marketing efficiency by showing how much new ARR you generate for every dollar spent on S&M. It answers: "Is our go-to-market investment paying off?"

A Magic Number of 1.0 means you're generating $1 of new ARR for every $1 spent on sales and marketing. That's the breakeven point for efficient growth.

Why Magic Number Matters

The Magic Number tells you whether to accelerate or optimize. Above 0.75, you should invest more aggressively in sales and marketing. Below 0.5, you need to improve efficiency before scaling spend.

It's especially useful for board conversations about budget allocation. A strong Magic Number justifies increased S&M investment. A weak one signals the need to fix fundamentals first.

Magic Number Benchmarks

Below 0.5: Inefficient. Fix your funnel before spending more. 0.5-0.75: Okay. Room for optimization. Above 0.75: Efficient. Scale your S&M investment. Above 1.0: Highly efficient. Accelerate aggressively.

Your quarterly data:

• Q1 ending ARR: $4,000,000
• Q2 ending ARR: $4,600,000
• Q1 S&M spend: $500,000

Magic Number = ($4.6M - $4M) ÷ $500K = $600K ÷ $500K = 1.2

Excellent efficiency. Every S&M dollar generates $1.20 in new ARR. Time to increase investment.