Description
The Growth Efficiency Index (GEI) is a metric that evaluates the cost of earning $1 of net ARR. GEI below 1.0 is considered optimal revenue acquisition while a value over 1.0 means suboptimal revenue acquisition.
Example
Growth Efficiency Index is calculated by dividing the current year's Sales and Marketing expenses by the Net New ARR of the Current Year.
Why it matters
For early and mid-state SaaS companies, growth is the main value driver. Therefore, such businesses must understand how efficient the business is in acquiring new recurring revenues. This will help in further checking back if they are investing appropriately in revenue acquisition.