SaaS Magic Number Calculator
Magic Number = (Net New ARR this quarter × 4) / Sales & Marketing spend prior quarter. Coined by Scale Venture Partners. >1 = scale sales efficiently; <0.5 = revisit acquisition strategy. Source: scalevp.com.
Magic Number Definition
Magic Number = (Net New ARR × 4) / Sales & Marketing spend in prior quarter. The ×4 annualizes the quarterly ARR. A score of 1 means for every $1 of S&M spend, you got $1 of new annual recurring revenue. Higher = more efficient acquisition. Source: Scale Venture Partners original framework.
Magic Number Interpretation
>1: scale sales aggressively — your spend pays back quickly. 0.75-1.0: healthy, optimize. 0.5-0.75: hold steady, investigate channels. <0.5: stop, revisit pricing/ICP/channel mix. The metric naturally drops as you scale (early customers easier to land than later cohorts). Stage-appropriate benchmarks matter.
Magic Number vs Other SaaS Metrics
Magic Number tracks short-term efficiency (1-2 quarter lookback). CAC Payback Period (in months) gives time perspective. LTV:CAC gives lifetime ratio. Burn multiple gives capital efficiency. Use all together — single metric can mislead. Bessemer Cloud Index reports Magic Number alongside Rule of 40.
Improving Magic Number
(1) Focus on best-converting channels. (2) Increase ARPA via packaging. (3) Reduce sales cycle. (4) Improve close rate via better qualification. (5) Cut underperforming reps or markets. Slack scaled with Magic Number >1.5 in early growth; Zoom hit >2 at IPO scale via PLG.