Magic Number Calculator
The SaaS Magic Number is a sales-and-marketing efficiency index that answers a critical scaling question: for every dollar you spend on go-to-market, how many dollars of annual recurring revenue do you get back? It divides your annualized net new revenue in a quarter by the sales and marketing spend of the prior quarter, accounting for the lag between when you spend and when that spend produces revenue. A Magic Number above 1.0 means your go-to-market motion is efficient enough to justify pouring in more capital; below 0.75 suggests you should fix conversion, targeting, or retention before scaling spend. Investors use it to judge whether a startup is ready to step on the gas. Enter your quarterly revenue and spend to measure your go-to-market efficiency.
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Results update live as you type. Estimates only — not financial, tax, or investment advice.
The Formula
Magic Number = (Quarterly Revenue Increase × 4) ÷ Prior Quarter Sales & Marketing Spend
Understanding the Magic Number Calculator
The Magic Number is read as a green-yellow-red signal for scaling. Above 1.0 is a green light: each dollar of sales and marketing spend is returning more than a dollar of annual recurring revenue within a year, so aggressive investment is warranted. Between 0.75 and 1.0 is efficient and healthy. Below 0.75 is a caution to improve the fundamentals — conversion rates, ideal-customer targeting, sales productivity, and retention — before adding fuel, because scaling an inefficient engine just burns cash faster.
Because it uses the prior quarter's spend against the current quarter's revenue gain, the Magic Number bakes in the real-world delay between investing in growth and seeing the payoff. It pairs naturally with the CAC payback period and LTV:CAC ratio: the Magic Number judges the efficiency of the whole go-to-market engine, while payback and LTV:CAC judge the economics of an individual customer. Together they tell you both whether each customer is profitable and whether your growth machine as a whole is worth scaling.
Frequently Asked Questions
What is a good SaaS Magic Number?
Above 1.0 is a strong green light to scale spend — each dollar of sales and marketing returns more than a dollar of annual recurring revenue within about a year. Between 0.75 and 1.0 is efficient and healthy. Below 0.75 signals you should improve go-to-market efficiency before investing more.
How is the Magic Number calculated?
Take the increase in recurring revenue from the previous quarter to the current quarter, multiply it by four to annualize it, and divide by the previous quarter's sales and marketing spend. Using the prior quarter's spend accounts for the lag between investing in growth and realizing the revenue.
What's the difference between the Magic Number and LTV:CAC?
The Magic Number measures the efficiency of your entire go-to-market engine at a macro level, while LTV:CAC measures the economics of an individual customer. A healthy business wants both: a Magic Number above 0.75–1.0 to justify scaling, and an LTV:CAC of 3:1 or better to confirm each customer is profitable.