The SaaS Magic Number measures sales-and-marketing efficiency: how much new annual recurring revenue each dollar of S&M spend generates.
What is SaaS Magic Number?
The Magic Number tells you whether to step on the gas. Above ~0.75 your go-to-market is efficient enough to invest more; below ~0.5 you should fix efficiency before adding spend.
How to calculate SaaS Magic Number
Worked example
You add $1,000,000 net new ARR in a quarter after spending $800,000 on S&M the prior quarter. Magic Number = ($1,000,000) ÷ $800,000 = 1.25.
What's a good SaaS Magic Number?
Above 1.0 is excellent (every S&M dollar returns more than a dollar of ARR within a year). 0.75–1.0 is healthy; below 0.5 signals inefficiency.
Frequently asked questions
Why multiply quarterly net new ARR?
To annualize the quarter's bookings so the ratio compares an annual revenue figure against the spend that produced it.
Magic Number vs LTV:CAC?
Magic Number is a top-down, quarter-level efficiency gauge from your P&L; LTV:CAC is a bottom-up, per-customer measure. They're complementary.
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