Magic number

Net new ARR in a period divided by the sales and marketing spend of the prior period — how much recurring revenue each pound of go-to-market buys.

Example

£120k of net new ARR from £150k of prior-quarter spend gives 0.8.

Important

Above roughly 0.75 usually means it is safe to spend more; well below it means fix the motion before scaling it. Like most benchmarks it assumes you already have a repeatable motion.

Related terms

• CAC (Customer Acquisition Cost) — The total sales and marketing spend to acquire one paying customer.
• ARR (Annual Recurring Revenue) — MRR multiplied by 12 — the annualised run rate of your recurring revenue.
• Burn multiple — Net burn divided by net new ARR — how much cash you consume to add a dollar of recurring revenue.
• Unit economics — The profit or loss on a single customer, once you strip out fixed costs.

All 176 terms in the Founder glossary