Magic Number Calculator

Measure sales efficiency by comparing new ARR generated against the sales and marketing spend behind it.

About Magic Number Calculator

The ratio divides one figure by the other and is read against a conventional benchmark of 0.75. Both the ratio and its percentage form are shown, because different audiences expect different presentations of the same number. A efficiency ratio compresses two absolute figures into one comparable number, which is what makes it usable across companies and periods of different size.

Formula

Magic Number

Magic Number = New ARR added in the quarter, annualised ÷ Prior-quarter sales and marketing spend

New ARR added in the quarter, annualised: Numerator of the ratio
Prior-quarter sales and marketing spend: Denominator of the ratio

Worked example

With the default values below, Magic Number Calculator returns Magic Number of 1.333. Change any input above and every figure here is recalculated in your browser.

Inputs used

New ARR added in the quarter, annualisedminimum 0: 1,200,000
Prior-quarter sales and marketing spendminimum 0: 900,000

Results

Magic Number: 1.333
Expressed as a Percentage: 133.33%
Surplus Over the Benchmark: 0.583
Inverse Ratio: 0.750
Interpretation: Strong — comfortably above the efficient enough to invest behind benchmark of 0.75

Step by step

1Values used
2Magic Number
3Magic Number= 1.333
4Expressed as a Percentage= 133.33
5Surplus Over the Benchmark= 0.583
6Inverse Ratio= 0.750
7Interpretation= Strong — comfortably above the efficient enough to invest behind benchmark of 0.75

Assumptions and limits

The result is derived only from the 2 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or fees or charges into account.
Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Magic Number calculated?

Magic Number = New ARR added in the quarter, annualised ÷ Prior-quarter sales and marketing spend The ratio divides one figure by the other and is read against a conventional benchmark of 0.75. Both the ratio and its percentage form are shown, because different audiences expect different presentations of the same number.

Why does Magic Number matter?

A efficiency ratio compresses two absolute figures into one comparable number, which is what makes it usable across companies and periods of different size.

What values do I need to enter?

This calculator takes 2 inputs: New ARR added in the quarter, annualised, Prior-quarter sales and marketing spend. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.