SaaS Magic Number: $2M New ARR, $2.5M S&M Spend
Adding $2M in new ARR against $2.5M in prior-quarter S&M spend yields a magic number of 0.8, below the ideal threshold of 1.
How to use this tool
- Enter the net-new ARR added during the most recent quarter.
- Enter the total sales and marketing spend from the immediately prior quarter.
- Read the magic number, implied CAC payback, and efficiency verdict.
A SaaS magic number below 1 suggests sales and marketing spending is not yet efficient enough — companies typically aim for a magic number of 0.75 or higher before scaling S&M.
Frequently asked questions
- What is a good SaaS magic number?
- A magic number of 0.75 or higher is generally considered efficient, and above 1.0 is excellent and usually justifies investing more in growth. Below 0.5 suggests the go-to-market motion needs fixing before adding spend.
- Why use the prior quarter's spend?
- Sales and marketing investment typically takes about a quarter to convert into closed, recurring revenue. Crediting this quarter's new ARR to last quarter's spend captures that lag and avoids flattering fast-growing budgets.
- Should I use gross or net new ARR?
- Net-new ARR (new plus expansion minus churn) gives the most honest reading because it reflects what your go-to-market actually added. Using gross new ARR alone ignores churn and overstates efficiency.