A free SaaS magic number calculator that measures go-to-market efficiency: how much new ARR each dollar of sales and marketing spend produces. The number that tells you whether to step on the gas or fix the engine first.
This calculator runs entirely in your browser. Nothing you enter is sent anywhere or stored. It is a quick estimate, not financial advice.
The magic number measures how efficiently your go-to-market spend converts into new recurring revenue. It answers the question every scaling SaaS faces: should we spend more or fix the engine first? This calculator uses the standard formula, dividing this quarter's net new ARR by last quarter's sales and marketing spend to account for the lag between spending and closing.
The interpretation is refreshingly clear. Below 0.5 and the engine is inefficient, so adding spend just burns money faster. Around 0.75 to 1 is healthy. Above 1 and you are likely under-spending, leaving growth on the table. Unlike many SaaS metrics, the magic number gives a fairly direct invest-or-fix signal.
Take the annual recurring revenue you added this quarter, net of churn. This is the output the spend produced.
Use last quarter's sales and marketing spend, not this quarter's, because revenue lags the spend that produced it.
Divide new ARR by prior spend. Below 0.5, fix efficiency first. Above 1, you can likely invest more in growth with confidence.
The SaaS magic number measures go-to-market efficiency by dividing net new ARR added in a quarter by the prior quarter's sales and marketing spend. It tells you how much new recurring revenue each dollar of spend produces. A magic number around 0.75 to 1 indicates a healthy, efficient growth engine, while a figure above 1 suggests you could invest more in growth and a figure below 0.5 signals the engine needs fixing before you scale spend.
Divide the net new ARR you added this quarter by the total sales and marketing spend from the prior quarter. Using the prior quarter's spend matters, because there is a lag between spending on go-to-market and the revenue it produces. Using net new ARR, after churn, rather than gross new ARR gives a truer picture of what the spend actually generated for the business.
Roughly 0.75 to 1 is healthy, indicating efficient growth where spend converts well into new ARR. Below 0.5 the engine is inefficient and adding spend mainly burns cash, so the priority is fixing conversion, retention or targeting. Above 1 is very efficient and usually signals under-investment: you could spend more on growth and still see strong returns. The metric gives an unusually clear invest-or-fix signal.
Because revenue lags spend. The marketing and sales effort in one quarter mostly closes in the next, given typical B2B SaaS sales cycles. Dividing this quarter's new ARR by this quarter's spend would mismatch cause and effect. Using the prior quarter's spend aligns the investment with the revenue it actually produced, which makes the efficiency reading far more meaningful.
A magic number above 1 is a strong signal that you can invest more in growth, because each dollar of spend is returning more than a dollar of new ARR. That said, scale deliberately rather than all at once, because efficiency can dip as you push into less efficient channels or audiences. Increase spend in steps and watch the magic number with each increment to find the point where efficiency starts to fade.
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