SaaS Magic Number Efficiency Calculator
Compute the SaaS magic number by comparing net new annual recurring revenue (ARR) against the prior quarter's sales and marketing spend. Enter the gross new ARR won this quarter, your churn percentage, and the previous quarter's sales and marketing investment to see the resulting efficiency ratio.
CalcSimpler Examples
- $40,000 new ARR, 5% churn, $80,000 spend ⇒ 1.90 ratio
- $55,000 new ARR, 12% churn, $100,000 spend ⇒ 1.94 ratio
FAQ
What does the SaaS magic number represent?
It estimates how efficiently sales and marketing spend converts into recurring revenue by annualising net new ARR and dividing by the prior quarter's spend.
How should churn be entered?
Enter the percentage of ARR lost during the quarter so the calculator can reduce gross wins to net new ARR.
What is a good magic number?
Values near 1.0 indicate efficient growth, while results well below 1 imply sales spend is not yielding enough ARR.
Additional Information
- Net new ARR is annualised by multiplying quarterly gains by four before dividing by spend.
- Many investors look for a magic number above 0.75 as a sign of sustainable growth.
- Use consistent quarters for both ARR and spend to keep the ratio meaningful.
CalcSimpler