What Is the SaaS Magic Number?
The SaaS Magic Number measures sales-and-marketing efficiency: how much new recurring revenue you generate for every dollar spent acquiring it. It compares the change in revenue to the prior period's S&M spend, and a number above roughly 0.75 generally signals it's efficient to invest more in growth.
Key takeaways
- Magic Number ≈ net new ARR in a period ÷ prior period's S&M spend.
- Above ~0.75 suggests efficient growth; below ~0.5 signals inefficiency.
- It's a quick gauge of go-to-market efficiency.
How to calculate it
Magic Number = Net New ARR (quarter) ÷ Prior Quarter S&M Spend
Often computed as the annualized change in quarterly revenue over prior-quarter S&M.
How to read it
- Above 1.0 — highly efficient; pour fuel on the fire.
- 0.75–1.0 — healthy; keep investing.
- Below 0.5 — inefficient; fix the motion before scaling spend.
Frequently asked questions
What is the SaaS magic number?
A measure of go-to-market efficiency: the new recurring revenue generated per dollar of sales-and-marketing spend.
What's a good magic number?
Above roughly 0.75 is generally considered efficient enough to keep investing; above 1.0 is excellent.
How do you calculate the magic number?
Divide the net new ARR added in a period by the prior period's sales-and-marketing spend.
Related service: Measure GTM efficiency in HubSpot