Article · 10 min read

SaaS Metrics: A Primer on SaaS Sales Efficiency

Dale Chang · Scale Venture Partners Free Intermediate

Separates gross sales efficiency, net sales efficiency and magic number, which most people use interchangeably and should not. Also sets the 0.7 long run median you will be judged against.

  • Gross sales efficiency is gross new ARR divided by total sales and marketing expense; net sales efficiency uses net new ARR instead.
  • The magic number version is the change in GAAP revenue between periods times 4, divided by sales and marketing expense.
  • Median sales efficiency in the Scale Studio dataset is around 0.7, and going above 1 is rare.
Open on scalevp.com ↗

It answers 2 questions

  1. What is the magic number and should I care about it at my stage?
  2. How do I use CAC payback and magic number to decide whether to hire more reps?

Read with it

  1. The magic number was invented at Scale, so this is the primary source, including the Omniture story behind the name and how the... Scale Venture Partners Article · 8 min read SaaS Metrics: A History of the Magic Number Dale Chang
  2. The formula reference: CAC, months to recover CAC, magic number, net MRR churn and NRR, each with the calculation spelled out.... For Entrepreneurs Article · 20 min read SaaS Metrics 2.0: Detailed Definitions David Skok
  3. Lays out Upekkha's Value SaaS argument that SaaS built from India is structurally capital efficient, which changes what a... Inc42 Article · 10 min read Why Indian Startup Ecosystem Needs More Catalysts Like Upekkha Than Typical Incubators And Accelerators? Team Inc42
  4. The question is whether the machine returns more than you feed it before you add reps, and this episode works through unit... The Revenue Formula Podcast · 42 min Better unit economics, PLG + SLG and more (with Kevin McIntyre) Kevin McIntyre with Toni Hohlbein and Raul Porojan
  5. Video · 6 min Understanding the SaaS Magic Number, Benchmarks, Nuances & Investor Insights | SaaS Metrics School Ben Murray
eChai Partner Brands The partnership →