What Is Magic Number?

A measure of sales efficiency — how much new ARR is generated per dollar of sales & marketing spend.

The SaaS Magic Number measures sales and marketing efficiency by comparing new ARR generated to the sales and marketing spend from the prior quarter. A magic number above 0.75 suggests efficient growth.

If your magic number is below 0.5, you're spending too much to acquire revenue and should optimize your funnel. Above 1.0, you should consider investing more aggressively in sales and marketing.

The magic number helps founders and investors evaluate whether scaling sales spend will drive proportional revenue growth or whether there are diminishing returns.