Definition
A ratio comparing new revenue generated to the sales and marketing cost required to generate it.
Formula
Net new ARR / Sales & marketing spend
How to measure
Divide net new ARR added in a period by the total sales and marketing spend during that same period.
Why track it
This ratio is a quick health check on whether go-to-market spend is producing proportionate revenue growth.
Example
A team generating $600,000 in net new ARR from $800,000 in sales and marketing spend reports a 0.75 sales efficiency ratio.
FAQ
- What is Sales Efficiency Ratio?
- A ratio comparing new revenue generated to the sales and marketing cost required to generate it.
- How do you calculate Sales Efficiency Ratio?
- Net new ARR / Sales & marketing spend
- Why track Sales Efficiency Ratio?
- This ratio is a quick health check on whether go-to-market spend is producing proportionate revenue growth.