What is Sales Efficiency?
Also known as: S&M efficiency, magic-number-like efficiency
Sales efficiency is new ARR generated per dollar of sales and marketing spend. The denominator of every CAC, Magic Number, and burn-multiple conversation.
What is Sales Efficiency?
For every $1 of S&M spend, how much new ARR did you produce? A ratio: 1.0 means you broke even immediately, 0.5 means you will need 2 years to pay back the spend.
How to calculate Sales Efficiency
Sales Efficiency = New ARR / S&M spend.
Some teams use Net New ARR (includes expansion − churn) to capture the impact of retention efforts too.
Sales Efficiency vs Magic Number vs CAC Payback
Magic Number = Q-over-Q net new ARR × 4 / prior quarter S&M. CAC Payback = months until CAC is recovered. All three measure efficiency at different time scales — pick the one that best matches your reporting cadence.
Why it matters
When sales efficiency drops, growth gets expensive. CFOs watch it monthly; investors interrogate it quarterly. Below 0.5 sustained is a red flag.