SaaS Magic Number Calculator 2026
Calculate the SaaS Magic Number — a measure of go-to-market efficiency that divides net new ARR by the prior quarter's sales and marketing spend. A Magic Number above 0.75 signals efficient growth; above 1.0 means every £1 invested in sales and marketing generates more than £1 in new ARR within a year.
Key Inputs
- Net new ARR this quarter (£) — current quarter ARR minus prior quarter ARR
- Sales and marketing spend in the prior quarter (£) — fully loaded S&M costs
What You'll Get
- SaaS Magic Number = (Net New ARR × 4) ÷ Prior Quarter S&M Spend
- Interpretation: below 0.5 (inefficient), 0.5–0.75 (acceptable), 0.75–1.0 (good), above 1.0 (excellent)
- Implied payback period in months from Magic Number
Important Notes & Benchmarks
Magic Number = (Net New ARR in quarter × 4) ÷ Sales & Marketing spend in prior quarter. Originally proposed by Wynne Mitchell and popularised by Scale Venture Partners. The ×4 annualises the quarterly ARR gain. Benchmarks: below 0.5 — reconsider GTM investment; 0.5–0.75 — acceptable but room for improvement; 0.75–1.0 — efficient growth; above 1.0 — accelerate S&M investment. Use prior quarter spend (not current) as new revenue is a lagged outcome of earlier investment.
Frequently Asked Questions
What is the SaaS Magic Number?
The SaaS Magic Number measures go-to-market efficiency: how much ARR is generated per pound spent on sales and marketing. Formula: (Net New ARR × 4) ÷ Prior Quarter S&M Spend. A score above 0.75 suggests the company should invest more aggressively in growth. Above 1.0 is exceptional — it means the GTM engine generates more than £1 of ARR for every £1 of S&M spend within a year.
How is the Magic Number different from CAC payback?
The Magic Number is a quarterly efficiency ratio that shows whether it is worth accelerating investment in sales and marketing. CAC payback period is a customer-level metric that shows how long to recover the cost of acquiring each customer. Both measure GTM efficiency from different angles. The Magic Number is more useful for board-level decisions on scaling spend; CAC payback is more useful for unit economics and cohort analysis.
What counts as sales and marketing spend for the Magic Number?
Fully loaded S&M spend includes: all sales and marketing salaries, commissions and on-target earnings (OTE), employer NI and benefits, marketing tools and software subscriptions, paid advertising and sponsorships, events and trade shows, and SDR/BDR team costs. Some companies include a portion of solution engineering or pre-sales costs. Consistency in definition matters more than the exact scope — use the same definition quarter over quarter for meaningful trend analysis.
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