Magic Number

Magic Number measures sales efficiency by comparing the incremental annualized revenue generated in a quarter with the Sales & Marketing expense from the prior quarter.

Using prior-quarter Sales & Marketing expense recognizes that acquisition spending typically precedes the revenue it generates.

A higher Magic Number generally indicates greater sales efficiency, with more incremental revenue generated for each dollar of Sales & Marketing expense.

Magic Number should be evaluated alongside retention, gross margin, and CAC Payback. Strong revenue generation is more valuable when the acquired revenue is durable and produces attractive gross profit.

MetricFrame calculates Magic Number by dividing the quarter-over-quarter annualized Net Revenue growth by the prior quarter's Sales and Marketing expense.