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Magic Number

A helpful metric brought about by Scale Venture Partners for calculating the sales and marketing efficiency of a SaaS company since Classic sales and marketing efficiency metrics are utterly misleading for SaaS companies. To calculate, take the change in subscription revenue between two quarters, annualize it (multiply by four), and divide the result by the sales and marketing spend for the earlier of the two quarters.

The general idea is that if the magic number is greater than one, more should be invested in sales and marketing. If the magic number is less than .7, additional energy should be invested in making customer acquisition more cost effective.

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Later Event: April 28
Cost of Goods Sold