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Sales and Marketing Efficiency

What Is Sales and Marketing Efficiency?

Sales and marketing efficiency measures how much revenue you generate based on your sales and marketing expenses.

You can calculate your S&M efficiency by dividing your gross revenue or gross new annual recurring revenue (ARR) by your sales and marketing expenses for the period. As a rule of thumb, having a sales and marketing efficiency of at least 1 is an indicator that your business is efficiently using its sales and marketing budget.

Some software as a service (SaaS) companies also use the magic number to measure sales efficiency. Rather than using gross revenue, the magic number compares a company’s net new ARR for the quarter to the previous quarter's sales and marketing expenses.

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