SaaS Magic Number Calculator
Calculate your SaaS Magic Number — the standard efficiency ratio that tells you whether to scale sales and marketing spend or fix the engine first. Coined by Scale Venture Partners and used across the cloud index. Enter quarterly revenue and S&M spend, get a clear go/no-go signal.
What Is the SaaS Magic Number?
The SaaS Magic Number is a sales efficiency ratio that measures how much new annualized revenue each dollar of sales and marketing spend produces. Coined by Scale Venture Partners in 2008, it remains the cleanest single number to decide whether your go-to-market engine is ready to scale. The math is simple: take the increase in quarterly revenue, annualize it, and divide by the prior quarter's S&M spend.
Magic Number Formula
Magic Number = (Current Q Revenue − Prior Q Revenue) × 4 / Prior Q S&M Spend
Healthy: 0.75 ≤ Magic Number ≤ 1.5
How to Read Your Score
Above 1.5 — your sales engine is so efficient that you are leaving growth on the table. Hire more reps, lift ad budgets, expand SDR coverage. Between 0.75 and 1.5 — your engine is working. Scale gradually and protect the unit economics. Between 0.5 and 0.75 — payback is acceptable but slow. Optimize before adding spend. Below 0.5 — your engine is broken. Adding more reps or ad spend will make it worse, not better. Fix conversion, ICP fit, or pricing first.
Magic Number vs CAC Payback
Both measure sales efficiency but from different angles. CAC Payback says "months to recover one customer's CAC." Magic Number says "annualized return on this quarter's S&M dollar." Magic Number is faster to read at a board level. CAC Payback is better when comparing channels or cohorts. Most operators report both — Magic Number for VCs, CAC Payback for the head of growth.
Common Mistakes
Three errors crush this metric. First, mixing in capitalized commissions or one-time bonuses inflates S&M and tanks the score. Second, including expansion revenue from existing customers makes a struggling new-logo engine look healthy — separate net-new from expansion. Third, comparing quarters with seasonality (Q4 to Q1) without smoothing produces misleading results. Always use a four-quarter rolling average for board-level reporting.
Benchmarks From Real SaaS
Public SaaS companies covered by Scale Venture Partners' research average a Magic Number around 0.7 across the cycle. Top-decile companies sustain 1.0 or higher for multiple quarters. During boom periods (2020-2021), median ran above 1.0; in efficient-growth eras (2023 onward), median sits around 0.6. If you are a Series A startup, expect 1.0+ as table stakes for your next round — investors discount any number that drops below 0.75 for two quarters in a row.
Sources: Scale Venture Partners SaaS Survey, Bessemer State of the Cloud, OpenView SaaS Benchmarks 2024. Last updated: April 2026.