Magic Number
Magic Number compares the change in Annual Recurring Revenue from one month to the next with the Sales and Marketing expense from the prior month.
In Rillet, the metric uses prior-month expense to reflect the timing difference between spending and revenue impact.
What This Report Shows
The Magic Number report displays values by reporting period.
The report includes the following elements:
Net New ARR The change in ARR between the current month and the prior month.
Sales and Marketing Expense from the Prior Month The qualifying Sales and Marketing expenses recorded in the month preceding the ARR change.
Magic Number The ratio calculated using Net New ARR and prior-month Sales and Marketing expense.
Benchmark Reference Line A reference value displayed in the chart for comparison purposes.
The period selector determines which reporting periods are displayed.
How Magic Number Is Calculated
Magic Number measures how efficiently sales and marketing spending generates new recurring revenue.
The calculation follows this formula:
The system defines each value as follows:
Current Month ARR minus Prior Month ARR Represents Net New ARR, or the change in ARR between two consecutive months.
Sales and Marketing Expense (Prior Month) The total qualifying sales and marketing expenses recorded in the month preceding the ARR change.
By using prior month expense, the metric reflects how effectively previous investment generates recurring revenue growth.
Sales and Marketing Cost Configuration
Rillet allows you to define which expenses are included in the Magic Number calculation.
You can configure Sales and Marketing costs using one of the following methods:
Field Values For example, fields such as Sales Department or Marketing Department.
GL Account Subtypes Operating Expense: Sales and Marketing, as defined in your Chart of Accounts.
These designations are configured in Report Settings. After configuration, Rillet includes the relevant journal entries in the Magic Number calculation.
See Also
Learn more about growth and efficiency metrics in Rillet:
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