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SaaS Magic Number Calculator

SaaS Magic Number definition and calculation using net new ARR and prior-period sales & marketing spend.

The SaaS Magic Number is a rough sales efficiency heuristic. It compares revenue output (net new ARR) to sales & marketing spend with a lag.

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Need definitions- Browse the glossary.
SaaS Magic Number: definition, formula, and how to use itUnit economics hub: CAC, LTV, payback, and runway (a practical stack)ARPA: how to calculate Average Revenue Per Account (formula + examples)How to calculate ARPU (Average Revenue Per User)
 
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4 for quarterly, 12 for monthly (used to annualize net new ARR).
Used to estimate required net new ARR or max spend.
Tip: you can type commas (e.g., 10,000).

Example

Using the default inputs, the result is:
2.5x
Net new ARR (period)
$250,000
Sales & marketing spend (prior period)
$400,000
Periods per year
4
Target magic number (optional)
1

How to calculate

  1. Pick a quarter (or month) and measure net new ARR for that period.
  2. Use the prior period's sales & marketing spend as the input spend (to account for lag).
  3. Set periods per year (4 for quarterly, 12 for monthly) to annualize net new ARR.
  4. Compute Magic Number ~= (net new ARR * periods per year) / prior-period S&M spend.

Formula

Magic Number ~= (Net new ARR in period * periods per year) / prior-period S&M spend
  • Uses a lag: prior-period S&M spend is compared to current revenue output.
  • Works best as a trend metric and when measured consistently (often quarterly).

FAQ

Is Magic Number the same as burn multiple-
No. Magic Number uses sales & marketing spend and net new ARR. Burn multiple uses net cash burn and net new ARR.

Common mistakes

  • Ignoring lag effects (spend today converts later).
  • Using a blended number that hides channel/segment differences.

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Estimate how many months it takes to recover CAC (months to recover CAC) using gross profit.

Quick checks

  • Keep time units consistent (monthly vs annual) across inputs and outputs.
  • Segment by cohort/channel/plan before trusting a blended average.
  • Use the related guide to avoid common definition and denominator mismatches.