Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
Sales Magic Number
1.78
Quarter-over-quarter ARR change
$400,000
Annualized new ARR run rate
$1,600,000
Implied S&M payback (months)
6.8
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How to use this
- 1Enter current quarter arr ($).
- 2Enter prior quarter arr ($).
- 3Enter prior quarter s&m spend ($).
- 4Read your sales magic number on the right — it updates as you type.
- 5Hit Share to keep the scenario or send it to someone.
About this calculator
The magic number compares the new recurring revenue generated in a quarter against the sales and marketing spend from the prior quarter, since S&M spend takes time to convert into bookings. A magic number above 0.75 generally signals it's efficient to keep pouring money into the sales engine because payback is fast enough to justify it; above 1.0 is excellent and suggests you're under-investing in growth relative to what the machine can absorb. Below 0.5 means growth is expensive right now — either the go-to-market motion needs fixing, the market is saturating, or reps are still ramping. This is a lagging quarter-over-quarter view, so it's noisy for one-off quarters (a single enterprise deal closing can spike it) and works best averaged over two to four quarters or segmented by go-to-market motion (SMB vs enterprise) since blending very different sales motions into one number hides what's actually driving efficiency.
Worked example
Using the values the calculator loads with:
Inputs
- Current quarter ARR: 4800000 $
- Prior quarter ARR: 4400000 $
- Prior quarter S&M spend: 900000 $
Results
- Sales Magic Number: 1.78
- Quarter-over-quarter ARR change: $400,000
- Annualized new ARR run rate: $1,600,000
- Implied S&M payback (months): 6.8
What each field means
Inputs
- Current quarter ARR ($)
- The current quarter arr used in the calculation, measured in $. Starts at 4800000 $ so you have a working example on load.
- Prior quarter ARR ($)
- The prior quarter arr used in the calculation, measured in $. Starts at 4400000 $ so you have a working example on load.
- Prior quarter S&M spend ($)
- The prior quarter s&m spend used in the calculation, measured in $. Starts at 900000 $ so you have a working example on load.
Results
- Sales Magic Number
- Returned as a decimal number and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Quarter-over-quarter ARR change
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Annualized new ARR run rate
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Implied S&M payback (months)
- Returned as a decimal number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
What magic number should I target?
Above 0.75 means it's efficient to invest more in sales and marketing; between 0.5-0.75 is acceptable but shows room for improvement; below 0.5 means the growth engine isn't yet efficient enough to justify aggressive additional spend, and you should investigate ramp time, win rates, or ICP fit first.
Why use prior-quarter S&M spend instead of current quarter?
New sales and marketing spend, especially reps just hired, takes a quarter or more to convert into signed ARR because of ramp time and sales cycle length. Comparing this quarter's new ARR to this quarter's spend understates efficiency since that spend hasn't fully paid off yet.
Should I include expansion ARR in the numerator?
Most versions include total net-new ARR (new plus expansion) since S&M often supports both. If your CS/AM team drives expansion independently of marketing spend, consider calculating a separate 'new logo magic number' isolating pure acquisition efficiency.
Is one quarter enough to judge sales efficiency?
No. Single-quarter magic numbers are volatile, especially with lumpy enterprise deals. Average over a trailing four quarters, and segment by motion (SMB vs mid-market vs enterprise) since blending different deal sizes and cycle lengths hides which part of the funnel is actually efficient.
Accuracy and limitations
- Results are estimates before tax, fees, and inflation unless an input explicitly covers them.
- Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.
- This is educational maths, not financial advice. Check anything contractual with the lender or your accountant.
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Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). Sales Magic Number Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/sales-magic-number
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/sales-magic-number" target="_blank" rel="noopener">Sales Magic Number Calculator — RevenueLab</a> (2026).</p>
Source: [Sales Magic Number Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/sales-magic-number) (2026).