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The canonical sales-efficiency ratio for SaaS. Annualized net new ARR divided by quarterly S&M spend tells you whether your GTM motion is paying for itself. Classified into the bands Bessemer and OpenView publish, with explicit handling for the contracting-ARR and zero-spend edge cases.
Magic number is the sales-efficiency ratio for SaaS businesses. The formula is (current-quarter ARR − prior-quarter ARR) × 4, divided by quarterly sales + marketing spend. The × 4 annualizes the quarterly net-new-ARR delta so the ratio compares full-year ARR added against the quarter's S&M input.
Bessemer and OpenView publish similar conventions: >1.5 exceptional (invest more aggressively), 1.0–1.5 good (continue investing), 0.75–1.0 OK (hold pace, watch trajectory), <0.75 bad (cut spend and find the bottleneck before investing more). Bands tighten at growth stage where the model should be tuned, and loosen at very early stage where quarterly noise dominates.
Burn multiple is total burn / net new ARR — it includes everything that consumes cash (R&D, G&A, infra, plus S&M). Magic number is narrower: only S&M spend in the denominator. Magic number tells you whether the GTM motion is working; burn multiple tells you whether the company as a whole is converting burn into revenue efficiently.
Then magic number is negative, which means S&M spend is destroying value rather than producing ARR. The calculator flags this state explicitly. The right response is to stop investing in growth until the underlying retention or expansion problem is fixed, not to spend more on top of a contracting base.
Magic number is undefined when S&M is zero — efficiency is a ratio and dividing by zero gives no signal. The calculator handles this case explicitly. Companies that grow with zero S&M (rare — usually product-led with strong virality) should look at growth rate alone rather than trying to compute an efficiency metric.
Yes — every input is encoded in the URL. The 'Copy share link' button copies the current URL to your clipboard. Send it to your board, head of sales, or growth-stage investor and they open the calculator with the same numbers.
Companion tool
Magic number measures GTM efficiency. Burn multiple measures whole-company efficiency. Use both during diligence.
Companion tool
Efficiency tells you whether to invest. Runway tells you how long you have to decide.
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Magic number
2.00
Exceptional — invest more aggressively.
Net new ARR (qtr)
$500k
Current ARR minus prior ARR.
Annualized × 4
$2M
The full-year run-rate added this quarter.
S&M spend
$1M
Quarterly sales + marketing input.
Bands: >1.5 exceptional · 1-1.5 good · 0.75-1 OK · <0.75 bad. Bands tighten at growth stage (Series C+) and loosen at very early stage where quarterly noise dominates.
Why this metric: magic number is the canonical sales-efficiency ratio. It says: for every dollar of S&M, how much annualized ARR did the company add? Above 1.0 means S&M is paying for itself within a year. Below 0.75 means each dollar produces less than 75 cents of annualized revenue and the spend probably needs to be reconsidered.
The URL contains your inputs — share with your board, head of sales, or growth-stage investor.
Educational tool. Real diligence pairs magic number with CAC payback, net dollar retention, gross margin, and burn multiple. Not financial planning advice.