SaaS Magic Number FAQ
Quick answers to the most common questions about SaaS Magic Number. For the full definition, formula, and benchmarks, see the SaaS Magic Number glossary page.
What is the SaaS magic number?
The magic number divides net new ARR added in a quarter by the sales and marketing spend of the quarter before. At 1.0, a dollar of S&M creates a dollar of ARR per year — spend pays back in roughly a year of revenue terms.
What is a good magic number?
Above ~0.75 is generally efficient enough to keep investing in growth; above 1.0 is excellent and usually a signal to invest more aggressively. Below ~0.5 the go-to-market engine needs fixing before it needs funding.
Keep exploring SaaS Magic Number
The SaaS Magic Number measures sales efficiency: how many dollars of new annual recurring revenue each dollar of sales and marketing spend generates, using prior-quarter spend to respect the lag between spend and revenue. Read the full SaaS Magic Number definition for formulas, benchmarks, and common mistakes.