SaaS magic number. Invest more, hold, or fix.
Enter last quarter's S&M spend and the new ARR added in this quarter. We compute the Magic Number and tell you which of the four standard bands you're in — fix product / hold steady / invest more / scale aggressively.
Enter last quarter's sales & marketing spend, and the net new ARR added in the current quarter. We compute the Magic Number using the standard formula and tell you which of the four bands your sales efficiency is in. Pure browser math.
Sales + marketing spend in the prior quarter. Just new-business spend, ideally.
New customer ARR + expansion - churn, this quarter only.
Privacy: calculation happens in your browser. Nothing is sent or logged.
One metric. One specific question.
What it measures. Sales-and-marketing efficiency at the aggregate level. For every dollar you spent on S&M last quarter, how many dollars of recurring revenue did that spend produce within the year. The metric was popularized by Scale Venture Partners in the late 2000s and has become the standard sales-efficiency benchmark across SaaS investors and operators.
What it doesn't measure. Per-customer economics (use LTV:CAC for that). Per-channel ROI (run that calc per acquisition channel separately). Long-term cohort behavior (cohort revenue analysis). The Magic Number is an aggregate sales-efficiency reading; a healthy figure can hide channel-level problems where some channels carry the load while others bleed.
When it matters most. At the growth-stage decision points: are we ready to raise more aggressively? Should we hire 5 more SDRs? Can we triple paid acquisition? The Magic Number is the single number that tells you whether the engine is converting fuel to motion efficiently. Pair with our LTV:CAC Calculator for the unit-economics complement and our Runway Calculator for the cash side.
Four jobs this tool covers.
Job 1: Quarterly board metric. The Magic Number is one of the metrics every SaaS board expects to see. Compute each quarter, drop into the deck with the trend line. The verdict band saves the conversation — "we're at 1.1, healthy zone, trending up" tells the board everything in one number.
Job 2: Hire-or-hold decision. When marketing wants to add 3 more SDRs or sales wants to spin up a new region, the Magic Number is the gating metric. If you're below 0.5 the answer is no — fix the engine first. If you're above 1.0, the answer is yes — you have efficient demand to capture. The band tells you the direction; the trend tells you the urgency.
Job 3: Channel-mix audit. Compute the Magic Number for each channel separately if your tracking supports it. The high-Magic-Number channels are where to invest the next dollar; the low-ones are where to cut. Common pattern: outbound sales has higher Magic Number than paid digital; product-led growth has higher than both. The blended figure can hide the per-channel reality.
Job 4: Pre-fundraise diagnostics. Investors will compute Magic Number from your S-1 / data room numbers. If yours sits below 0.75 you'll get pushback. Run the calculator first, see what investors will see, prepare the answers (sales cycles lengthening, channel-mix shift, pre-revenue product investment). Better to land the conversation than be caught off guard.
Six questions users ask.
What is the Magic Number formula?
Magic Number = (current quarter Net New ARR × 4) / previous quarter Sales & Marketing spend. The ×4 annualizes a single quarter's new ARR; the previous-quarter S&M is the lagged input because spending today produces revenue next quarter (sales cycle). The metric was popularized by Scale Venture Partners and is a sales-efficiency benchmark used across SaaS investors. It answers one question: for every dollar of S&M spend, how many dollars of recurring revenue did you produce?
Why use last quarter's S&M, not this quarter's?
Sales cycles. Most SaaS deals close 30-90 days after the marketing/sales activity that surfaced them. ARR closing this quarter was driven by S&M spend in the previous quarter (or earlier). Using same-quarter S&M would double-count: this quarter's S&M will produce next quarter's ARR, not this quarter's. The lagged formulation is the conventional SaaS metric definition; mismatched quarters in either direction will distort the figure.
What does each verdict band mean?
Below 0.5: sales efficiency is poor; the spend is not converting to revenue. Either fix product-market-fit, fix sales execution, or cut S&M before going further. 0.5-0.75: neutral, monitor closely. 0.75-1.0: healthy, growing efficiently — keep doing what you're doing. 1.0-1.5: under-investing in growth — scale up acquisition spend; you have more efficient demand than you're capturing. Above 1.5: scale aggressively — every additional dollar of S&M is producing more than 1.5x in new ARR; pour fuel on the fire.
Should I include all sales spend or just new-business spend?
Just new-business S&M, ideally. Customer Success spend (existing-customer retention and expansion) is operationally separate from the new-customer-acquisition function the Magic Number measures. If your accounting blends them, divide proportionally — typically 30-40% of S&M goes to existing-customer functions in a mature SaaS. Using the blended number deflates the Magic Number; investors will ask you to break it out, so build the habit of tracking new-business S&M separately from the start.
Net new ARR or gross new ARR?
Net. New ARR from new customers + expansion ARR from existing customers, minus churn. The Magic Number measures how efficiently you grow the recurring-revenue base; if churn is eating your new-customer wins, the Magic Number should reflect that drag. Some companies publish gross-new ARR (new customers only) for the same metric — be aware which version the investor is using when they cite a number, because the two can differ meaningfully on high-churn businesses.
Is the data I enter sent anywhere?
No. Calculation happens entirely in your browser. The page is static HTML; the only network request is the initial page load. Safe for sensitive financial data, internal SaaS metrics, or any number you wouldn't want shared with a third party.