SaaS Magic Number Calculator

What is Magic Number?

The SaaS magic number compares net new ARR created in a quarter to prior-quarter sales and marketing spend. It is a quick read on whether S&M dollars are converting into ARR efficiently.

Formula

Version v1. See methodology and the public formula repo for sources and change history.

Worked example

Using the default example inputs (Current quarter ARR: $2,400,000; Prior quarter ARR: $2,000,000; Prior quarter sales and marketing spend: $300,000), Magic Number equals 1.33:1 (Magic number). A magic number above 1.0 usually signals efficient ARR creation from sales and marketing spend.

What good looks like

Values around 0.75 to 1.0+ often signal efficient ARR creation in classic benchmarks, but definitions vary. Track trend and pair with CAC payback and pipeline quality.

Directional guidance only, not a cohort benchmark claim. Premium cohort bands appear when sample thresholds are met for your profile.

Read the Magic Number benchmark guide for methodology, cohort percentiles, and how participant bands differ from public guidance.

FAQ

What is Magic Number?

The SaaS magic number compares net new ARR created in a quarter to prior-quarter sales and marketing spend. It is a quick read on whether S&M dollars are converting into ARR efficiently.

What is the Magic Number formula?

Magic Number = (Current quarter ARR - Prior quarter ARR) / Prior quarter sales and marketing spend

Which quarter's spend is in the denominator?

Prior quarter S&M spend. The idea is spend precedes ARR creation. Align fiscal calendars when reporting to investors.

Magic number vs CAC?

Magic number is ARR-based and quarterly; CAC is customer-based. Use both when diagnosing GTM efficiency.

Should expansion ARR count?

Net new ARR here is total ARR change quarter over quarter, which includes expansion from the base unless you segment it.