How do I calculate Magic number?

Use the formula(s) on this page. Keep inputs consistent by period and basis.

What are good benchmarks?

Benchmarks vary by model and stage. See Benchmarks on this page for ranges.

Inconsistent definitions/time windows; wrong basis (revenue vs gross profit).

Pitchkit

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GLOSSARY

Magic number

Sales efficiency: new ARR growth per $1 of prior S&M spend.

Rule of thumb

≈ 0.7–1.0 suggests efficient spend; << 0.5 is weak; > 1.0 is strong but rare.

Worked example

ARR_t $2.6M vs ARR_{t−1} $2.2M → ΔARR = $0.4M. Prior quarter S&M = $0.5M → Magic = (0.4×4)/0.5 = 3.2.

Common pitfalls

Using bookings not ARR; ignoring seasonality; not lagging S&M spend one quarter.

How to show in your deck

Financials slide footnote with CAC, payback, and magic number for completeness.

Deck snippet

Back to Glossary

GLOSSARY

Magic number

Sales efficiency: new ARR growth per $1 of prior S&M spend.

Rule of thumb

≈ 0.7–1.0 suggests efficient spend; << 0.5 is weak; > 1.0 is strong but rare.

Worked example

ARR_t $2.6M vs ARR_{t−1} $2.2M → ΔARR = $0.4M. Prior quarter S&M = $0.5M → Magic = (0.4×4)/0.5 = 3.2.

Common pitfalls

Using bookings not ARR; ignoring seasonality; not lagging S&M spend one quarter.

How to show in your deck

Financials slide footnote with CAC, payback, and magic number for completeness.

Magic number

Rule of thumb

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Magic number

Rule of thumb

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Formulas

FAQs

Related terms

Rule of thumb

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Rule of thumb

Worked example

Common pitfalls

How to show in your deck

Deck snippet

Formulas

FAQs

How do I calculate Magic?

What are good benchmarks?

Common pitfalls?

Related terms