Magic Number
The magic number measures how efficiently your sales and marketing spend turns into recurring revenue. You divide the new annual recurring revenue added in a quarter by the sales and marketing spend in the prior quarter. A result around 1 or higher means roughly every pound of go-to-market spend earns back a pound of new annual recurring revenue within the year, the threshold where it makes sense to spend more aggressively.
For a founder deciding whether to pour fuel on the fire, this is the gauge. A magic number below about 0.5 says your acquisition engine isn't efficient yet, spending more would just burn cash, so fix the funnel before scaling spend. Above 0.75, the engine works well enough that adding budget should produce proportional growth. It's a fast, top-down sanity check that complements the bottom-up view from CAC payback, and it keeps you from scaling a leaky machine.