Comparing Sales & Marketing (S&M) spend to ARR from new customers helps show how efficiently S&M spend translates to new revenue.
New Sales ARR / S&M = New Sales ARR÷S&M Expenses
While there are more sophisticated metrics for tracking sales efficiency, such as CAC Payback and LTV, New Sales ARR / S&M is helpful because of its simplicity: it doesn't look at S&M offsets, expansion, or gross margins, but solely focuses on sales and marketing spend compared to new ARR. Since the primary purpose of sales and marketing teams is sell new customer contracts, this metric measures their direct impact without any noise. A ratio of 1 is fantastic: spending $1 produces $1 of new ARR, which is hopefully renewed and expanded over time.