Magic Number SaaS

The Magic Number is a key metric used in the SaaS industry to measure the efficiency of a company's sales and marketing efforts relative to its growth. It is calculated by dividing the change in Annual Recurring Revenue (ARR) over a specific period by the sales and marketing expenses from the previous period.

A Magic Number greater than 1 indicates that a company is generating more incremental revenue than it's spending on sales and marketing, suggesting efficient growth. A number between 0.5 and 1 is considered good, while a number below 0.5 may indicate that the company needs to improve its sales and marketing efficiency or reconsider its go-to-market strategy.