Metrics
SaaS Magic Number
The SaaS magic number measures sales efficiency: the net new annualised recurring revenue generated in a quarter, divided by the sales and marketing spend of the prior quarter. A result above roughly 0.75–1.0 is generally read as efficient enough to justify increasing go-to-market investment.
The one-quarter lag between spend and resulting revenue is deliberate: it accounts for the sales cycle time between spending on pipeline generation and that pipeline closing as revenue, which a same-quarter ratio would understate.
Like most single-number efficiency metrics, it's sensitive to sales-cycle length and deal size, so it's more useful compared against a company's own trend over time than benchmarked directly against companies with very different go-to-market motions.
Example
A company that added $2M in net new ARR this quarter after spending $2.5M on sales and marketing last quarter has a magic number of 0.8.