SaaS Magic Number Calculator
Measure sales efficiency with the SaaS Magic Number: net new ARR divided by last quarter's sales and marketing spend.
Quarterly numbers
Magic Number
Net new ARR per dollar of sales and marketing
Enter your quarterly numbers to see the Magic Number.
A simple rule for when to invest in growth
The Magic Number, popularized in SaaS circles by investors such as Bessemer Venture Partners, asks one question: did the last dollar you spent on sales and marketing produce enough new recurring revenue to justify the next dollar? The common reading is simple. Above 1.0, invest more. Between 0.5 and 1.0, invest with discipline. Below 0.5, fix product-market fit or the funnel before you scale spend.
How it is calculated
Magic Number = (ARR this quarter - ARR last quarter) / sales and marketing spend last quarter.
The spend comes from the prior quarter because deals usually close some time after the money is spent to win them. If you track quarterly revenue instead of ARR, multiply the change in quarterly revenue by four to get the same result.
Frequently asked questions
Should I use quarterly or annual numbers?
Quarterly is the standard. Annual figures smooth over too many swings to tell you whether recent spend is working.
Should net new ARR include churn?
Yes. Using the change in total ARR means churn and contraction are already subtracted, which gives a more honest view of efficiency than new bookings alone.