Evaluate your go-to-market efficiency by measuring how much revenue you generate per dollar of sales and marketing spend.
Current Quarter ARR ($)
Previous Quarter ARR ($)
Previous Quarter S&M Spend ($)
Measure how efficiently sales and marketing spend turns into net new ARR.
Add ARR at the end of the current quarter. Use the same ARR definition used in your finance or board reporting.
Add ARR from the end of the prior quarter. The calculator uses the difference to estimate net new ARR.
Enter sales and marketing spend from the previous quarter, including ads, sales salaries, commissions, tools, agencies, and campaign costs.
Calculate the Magic Number to see net new ARR per dollar of spend and whether the result looks efficient, improving, or weak.
Use SaaS Magic Number to evaluate whether go-to-market investment is producing efficient ARR growth.
01
Connect sales and marketing spend to ARR growth. The result helps determine whether acquisition investment is translating into meaningful recurring revenue.
02
Use the Magic Number to decide whether to scale, hold, or reduce go-to-market spend based on how efficiently recent investment created net new ARR.
03
Monitor changes in efficiency across quarters to spot when pipeline quality, conversion, pricing, or churn is improving or weakening ARR creation.
04
Give sales, marketing, finance, and leadership a shared metric for discussing spend productivity, ARR growth, and future capacity planning.
The SaaS Magic Number measures go-to-market efficiency by comparing net new ARR generated in a quarter with the sales and marketing spend from the previous quarter.
Subtract previous quarter ARR from current quarter ARR, then divide the net new ARR by previous quarter sales and marketing spend. The result shows how much ARR is created for each dollar spent.
A Magic Number around 0.75 or higher is often considered efficient, while 0.5 to 0.75 can show improving performance. Below 0.5 may suggest weak sales efficiency or long payback periods.
Previous quarter spend is used because sales and marketing investments usually create ARR with a lag. Matching spend to the following ARR change gives a cleaner read on go-to-market efficiency.
Yes. If current quarter ARR is lower than previous quarter ARR, net new ARR is negative and the Magic Number becomes negative. That can indicate churn, contraction, or weak new bookings.
Both measure efficiency, but from different angles. Magic Number compares ARR added to sales and marketing spend, while CAC payback estimates how long gross profit takes to recover acquisition cost.
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