Magic Number
A sales efficiency metric measuring how much annualised recurring revenue is generated for every dollar invested in sales and marketing in the prior quarter.
What it shows
Magic Number above 0.75 suggests the business should invest more aggressively in S&M. Below 0.5 signals the go-to-market model is inefficient and should be optimised before scaling spend — a common due diligence metric in SaaS fundraising.
Formula
Magic Number = (Current Quarter ARR − Prior Quarter ARR) × 4 ÷ Prior Quarter S&M Spend. The ×4 annualises the quarterly ARR increment.
Tracked in these industries
SaaS B2B
Subscription-based software sold to businesses. Long sales cycles, multi-stakeholder procurement, and recurring revenue tracked through ARR, NRR, and churn.
SaaS B2C
Subscription software sold directly to individuals. Self-serve, high volume, short cycles — revenue operations focused on activation, retention, and reducing involuntary churn.