Sales Magic Number (Live)

What it measures

The annualized recurring revenue from contracts that went live (entered active billing) in a period, divided by the cash spent on sales and marketing in that same period. The numerator is gross new-business inflow only — it counts the run-rate from net-new logos that started billing, never expansion on existing accounts and never one-time setup, services, or usage fees. The denominator is every direct and indirect S&M cost in the period: salaries, commissions, bonuses, benefits, advertising, events, tools, and campaign spend. The result is the productivity of a sales-and-marketing dollar at landing live, currently-billing recurring revenue.

Why it matters

Sales Magic Number (Live) tells you whether your go-to-market engine is converting spend into revenue you are actually billing. A reading of 0.75 means every dollar of S&M produced $0.75 of new annualized recurring revenue that went live — and because it counts go-lives rather than bookings, it ties efficiency to cash you are recognizing now, not to forward bookings that haven't switched on. It is one of the few top-line efficiency ratios investors and boards read directly when sizing SaaS unit economics. Unlike CAC Payback, which folds in retention and gross margin, the Live Magic Number is immediate and actionable: close bigger deals, get them live faster, or spend less, and the number moves the same period.

How to read it

Read the Live Magic Number as a trend against your own history and stage, never as a single absolute. Above 1.0 you are generating more than a dollar of new live ARR per S&M dollar — strong, and a signal your team can scale spend. 0.75 to 1.0 is healthy for a growth-stage SaaS with repeatable execution. Below 0.5 is a red flag: even allowing for sales-cycle lag, you are not landing enough new live ARR to justify the spend. But context dominates — early-stage companies often run 0.3 to 0.5 for 12 to 18 months while brand and pipeline build, and mature companies frequently settle at 0.6 to 0.8. Always pair it with sales-cycle length: this month's spend may not go live for several months, so a rising trend across a trailing window matters far more than any one reading.

What good looks like

Watch-outs

• Counting signed ARR instead of live ARR. A contract signed in January may not go live until March. Count its annualized ARR only in the month it starts billing — counting it at signature makes the Live Magic Number lag reality and masks slow activation or onboarding bottlenecks.
• Ignoring sales-cycle lag. If your average cycle is four months, May's S&M spend may not produce live deals until September. Reading a single month's ratio in isolation makes efficient spend look terrible; use a trailing-quarter or TTM window so numerator and denominator reflect the same demand wave.
• Mismatching cash and accrual across periods. If you accrue $100K of S&M in June but pay $40K, pick one basis and hold it. Mixing them quarter to quarter makes the metric uncomparable; most teams use accrual to match revenue recognition.
• Understating S&M spend. Salaries and commissions are easy to capture; tools, events, advertising, partner and channel commissions, and acquisition bounties are easy to forget. Omitting them shrinks the denominator and overstates the ratio, hiding the real cost of growth.
• Letting expansion leak into the numerator. New Live ARR is net-new logos only. Folding in upgrades on existing live accounts inflates the acquisition signal and conflates retention with new-business efficiency — expansion belongs to the Contracted variant or to NRR, not here.

Worked example