SaaS Magic Number Calculator

Magic number is the sales-efficiency ratio for SaaS businesses. The formula is (current-quarter ARR − prior-quarter ARR) × 4, divided by quarterly sales + marketing spend. The × 4 annualizes the quarterly net-new-ARR delta so the ratio compares full-year ARR added against the quarter's S&M input.

Bessemer and OpenView publish similar conventions: >1.5 exceptional (invest more aggressively), 1.0-1.5 good (continue investing), 0.75-1.0 OK (hold pace, watch trajectory), <0.75 bad (cut spend and find the bottleneck before investing more). Bands tighten at growth stage where the model should be tuned, and loosen at very early stage where quarterly noise dominates.

Burn multiple is total burn / net new ARR, it includes everything that consumes cash (R&D, G&A, infra, plus S&M). Magic number is narrower: only S&M spend in the denominator. Magic number tells you whether the GTM motion is working; burn multiple tells you whether the company as a whole is converting burn into revenue efficiently.

Then magic number is negative, which means S&M spend is destroying value rather than producing ARR. The calculator flags this state explicitly. The right response is to stop investing in growth until the underlying retention or expansion problem is fixed, not to spend more on top of a contracting base.

Magic number is undefined when S&M is zero, efficiency is a ratio and dividing by zero gives no signal. The calculator handles this case explicitly. Companies that grow with zero S&M (rare, usually product-led with strong virality) should look at growth rate alone rather than trying to compute an efficiency metric.

Yes, every input is encoded in the URL. The 'Copy share link' button copies the current URL to your clipboard. Send it to your board, head of sales, or growth-stage investor and they open the calculator with the same numbers.