Free ForeverNo SignupSales EfficiencyUpdated 2026

Magic Number Calculator

The SaaS sales efficiency metric — how much new ARR you generate for every dollar spent on sales and marketing.

The Magic Number = (Current Quarter ARR − Last Quarter ARR) × 4 ÷ Last Quarter S&M Spend. A magic number of 1.0 means you generate $1 of ARR for every $1 of sales & marketing spend. Above 0.75 is typically the threshold to accelerate spend. Below 0.5 signals the go-to-market is not efficient enough.

Current Quarter ARR

ARR at the end of the current quarter

Previous Quarter ARR

ARR at the end of the prior quarter

Previous Quarter S&M Spend

Sales & marketing expenses in the prior quarter

The Formula

Magic Number = (Current Q ARR − Last Q ARR) × 4 ÷ Last Quarter S&M Spend

In plain English

Subtract last quarter ARR from current quarter ARR. Multiply by 4 to annualise. Divide by last quarter S&M spend.

Worked Example

($5.2M − $4.8M) × 4 ÷ $600K = $1.6M ÷ $600K = 2.67.

How to Use the Magic Number

The magic number answers: "Given what we spent on sales & marketing last quarter, how efficiently did we convert that into ARR?" It's the most widely used S&M efficiency metric for investor benchmarking.

Use prior quarter S&M (not current) because there's a lag — this quarter's ARR results from last quarter's demand generation. Using concurrent quarter data creates a misleading instantaneous snapshot.

> 0.75

Threshold to increase S&M spend

1.0

Break-even efficiency (1:1 return)

0.5

Warning threshold — slow down spend

4×

Annualisation factor for quarterly ARR delta

Magic Number Benchmarks (2026)

Magic Number	Signal	Action
> 1.5	Excellent	Accelerate spend heavily
0.75–1.5	Good	Continue investing
0.5–0.75	Moderate	Pause hiring, diagnose
< 0.5	Poor	Fix GTM before spending

Source: Bessemer Venture Partners Cloud Index 2025

Common Mistakes

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Using current quarter S&M instead of prior quarter

This quarter's ARR growth is driven by last quarter's marketing spend. Using concurrent quarters creates misleading results — always use prior quarter S&M in the denominator.

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Including all company spend in S&M

Only include sales and marketing — not G&A, R&D, or customer success. Including other cost centres makes the magic number look worse than the true GTM efficiency.

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Comparing magic numbers across very different business models

PLG companies naturally have higher magic numbers than enterprise companies. Compare your magic number against companies with similar sales motions and ACV ranges.