Is your sales and marketing spend actually paying off?

The magic number measures sales efficiency by dividing the new ARR (or new revenue, annualised) added in a quarter by the sales and marketing spend of the prior quarter. The prior-quarter spend is used because there's usually a lag between spending on go-to-market and the revenue it produces. The result tells you how many dollars of new recurring revenue each dollar of go-to-market spend generated, which is a quick read on whether your acquisition engine is efficient.

A magic number around 1 is commonly read as healthy — roughly a dollar of new ARR for a dollar of prior spend, implying reasonable payback — while numbers well above 1 suggest you could profitably spend more, and numbers well below suggest acquisition is expensive relative to what it returns. As with most SaaS metrics, the trend and your own unit economics matter more than a universal threshold, so track it over several quarters rather than reading a single figure.

A ready-to-use spreadsheet (Excel & Google Sheets): the SaaS magic number by quarter from new ARR and prior-quarter sales and marketing spend, with the trend — delivered instantly after checkout. AI-assisted, human-built; not financial advice.