SaaS Magic Number Calculator
The magic number tells you how many dollars of new annual recurring revenue each dollar of sales-and-marketing spend buys. Enter three numbers to get your score, a verdict against the 0.75 efficiency threshold, and your implied CAC payback.
Your numbers
Magic number lags spend on purpose: this quarter's new revenue is divided by last quarter's S&M, because sales and marketing take time to convert.
< 0.75 = inefficient (fix GTM) · 0.75–1.0 = efficient, sustainable · > 1.0 = step on the gas. Benchmarks: SaaS Capital, Bessemer.
The SaaS magic number formula
Magic number = (current-quarter revenue − prior-quarter revenue) × 4 ÷ prior-quarter S&M spend. The revenue change is multiplied by four to annualise it (turning the quarterly gain into net new ARR), then divided by what you spent on sales and marketing the previous quarter, spend is lagged because it takes time to convert into revenue. An equivalent way to write it is net new ARR ÷ prior-quarter S&M spend.
The result is unitless: a magic number of 1.0 means every $1 of S&M generated $1 of new ARR over the following year.
Worked example: a quarter of 20% growth
Revenue grew from $1,000,000 to $1,200,000 this quarter, after $800,000 of sales and marketing spend last quarter:
| Current quarter revenue | $1,200,000 |
|---|---|
| Prior quarter revenue | $1,000,000 |
| Prior quarter S&M spend | $800,000 |
| Gross margin | 80% |
| QoQ revenue growth | +20.0% |
| Net new ARR (($1,200,000 − $1,000,000) × 4) | $800,000 |
| Magic number ($800,000 ÷ $800,000) | 1.00 (Step on the gas) |
| Gross magic number ($800,000 × 80% ÷ $800,000) | 0.80 |
| Implied CAC payback (12 ÷ 1.00) | 12.0 mo |
What is a good magic number?
- Below 0.75, inefficient. You're spending more on growth than it's returning; tighten targeting, pricing or sales motion before adding spend.
- 0.75 to 1.0, efficient and sustainable. This is the healthy zone; keep funding growth at the current pace.
- Above 1.0, step on the gas. Acquisition is paying back fast enough that adding S&M is likely accretive. Above ~1.5 is a top-decile outlier.
The 0.75 line is the widely-cited efficiency breakeven (popularised by VC Lars Leckie; the magic-number concept itself comes from Scale Venture Partners). Treat it as a directional signal over several quarters, not a single-quarter verdict, one lumpy enterprise quarter can distort it.
Gross magic number and CAC payback
The gross magic number, a stricter, margin-adjusted variant (not a standardised industry term), multiplies net new ARR by gross margin before dividing by S&M, so it reflects the margin dollars actually available to recoup the spend. The calculator also shows your implied CAC payback period (≈ 12 ÷ magic number, in months): a magic number of 1.0 implies roughly a 12-month payback. Under 12 months is generally healthy; over 24 is a warning sign.
How much should SaaS spend on sales and marketing?
S&M as a share of revenue varies by stage and scale. The median B2B SaaS company spent 35% of revenue on sales and marketing in 2025 (Benchmarkit 2026). The magic number is the efficiency check on that spend: it tells you whether the S&M budget, whatever its size, is actually working.
Frequently asked questions
What is the SaaS magic number formula?
What is a good SaaS magic number?
What is the net magic number formula?
Why use prior-quarter S&M spend instead of the current quarter?
Is the magic number the same as the sales efficiency ratio?
How is the magic number related to CAC payback?
Cite this page
Citation
Adlega. "SaaS Magic Number Calculator and Formula." Updated October 22, 2026. https://adlega.com/blog/tools/magic-number/
Link for your article
<a href="https://adlega.com/blog/tools/magic-number/">SaaS Magic Number Calculator and Formula</a> (Adlega, updated October 22, 2026)
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