The SaaS magic number measures sales and marketing efficiency by comparing new recurring revenue to the spend that generated it. You divide the annualized increase in recurring revenue for a period by the prior period's sales and marketing spend. A result near or above 1 suggests efficient, fundable growth.

The magic number tells you whether spending more on growth is justified. Above roughly 0.75, your acquisition is efficient enough that pouring in more fuel makes sense. Below it, you are spending too much for the revenue you get, and scaling would burn cash without a proportional return. It is a one-number gut check before raising the budget.

Example:

 New ARR rose by $400,000 this quarter; last quarter's sales and marketing spend was $500,000. The magic number is 400,000 / 500,000 = 0.8.

What is a good SaaS magic number?

 Around 0.75 or above generally signals efficient growth worth investing more in. Below that suggests acquisition is too costly to scale profitably yet.

How is the magic number different from CAC?

 CAC measures cost per customer. The magic number measures revenue efficiency across all sales and marketing spend, giving a portfolio-level view rather than a per-customer one.