Magic Number
Also: SaaS Magic Number
A measure of sales and marketing efficiency: how much new recurring revenue each euro of sales and marketing spend generates.
Why it matters
The magic number tells you how efficiently your go-to-market spend converts into new recurring revenue, a key input for deciding whether to spend more or fix efficiency first. It is widely used by investors to gauge whether growth spending is paying off. A higher number means more efficient growth.
How it is calculated
Magic Number = (net new ARR in a quarter, annualised) / sales and marketing spend in the prior quarter
What good looks like
A magic number above roughly 0.75 is often read as efficient enough to invest more aggressively, below about 0.5 suggests fixing efficiency before scaling spend. It is a directional gauge, not a precise verdict.
Related terms
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