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SaaS Magic Number Calculator
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SaaS magic number = (current quarter ARR − prior quarter ARR) × 4 ÷ prior quarter S&M spend. A company that grows ARR by $250K in a quarter after spending $500K on sales and marketing the prior quarter has a magic number of (250,000 × 4) / 500,000 = 2.0. Above 0.75 is generally considered efficient enough to justify increasing sales and marketing spend; below 0.5 signals you should slow spend and fix efficiency first. This calculator returns your score instantly from three inputs.
Your SaaS magic number
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How the SaaS magic number is calculated
Magic number = (current quarter ARR − prior quarter ARR) × 4 ÷ prior quarter sales & marketing spend. The ×4 annualizes a single quarter's net new ARR so it can be compared against a full year of run-rate spend.
A company growing ARR from $1,750,000 to $2,000,000 in a quarter, after spending $500,000 on sales and marketing the prior quarter, has a magic number of (250,000 × 4) / 500,000 = 2.0 — every dollar of prior-quarter S&M spend is generating $2 of new annualized recurring revenue this quarter.
What counts as a good magic number
The commonly cited bands, popularized by Scale Venture Partners: above 1.0 means your go-to-market engine is highly efficient and you should consider spending more aggressively; 0.75-1.0 is healthy and worth continued investment; 0.5-0.75 is workable but has room to improve; below 0.5 signals inefficient spend and you should fix conversion or retention before adding more sales and marketing budget.
Magic number uses prior-quarter spend deliberately, since sales and marketing investment typically takes a quarter or more to convert into signed revenue — comparing this quarter's growth to this quarter's spend would understate efficiency for any company still ramping.
FAQ
Questions
What is a good SaaS magic number?
Above 1.0 is highly efficient and usually justifies increasing sales and marketing spend. 0.75-1.0 is healthy. 0.5-0.75 is workable but has room to improve. Below 0.5 signals inefficient spend that should be fixed before scaling budget further.
Why does magic number use prior quarter S&M spend instead of the current quarter?
Because sales and marketing spend typically takes a quarter or more to convert into signed, recognized ARR. Comparing this quarter's ARR growth to prior-quarter spend better reflects the lag between spend and the revenue it produces.
How is magic number different from CAC payback period?
Magic number measures overall go-to-market efficiency at the company level (net new ARR vs. total S&M spend), while CAC payback period measures how many months it takes to recover the cost of acquiring one customer. They're complementary: a good magic number confirms the sales and marketing engine works in aggregate, while CAC payback confirms unit economics work per customer.
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