Magic Number compares how sales and marketing spend translates to changes in ARR, taking expansion, contraction, and churn into account.

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Magic Number is a measure of capital efficiency, particularly in sales and customer success. Other efficiency metrics like CAC Payback measure ARR growth from new sales and expansion only, but because Magic Number incorporates contraction and churn, it makes sure the overall business is selling efficiently. Put differently, a company good at sales but poor at retention can hide that in CAC payback numbers, but its true performance will be revealed by evaluating Magic Number, especially as the business scales.