What is a good SaaS magic number?
The magic number benchmark is a simple traffic light for go-to-market spending. Above 0.75, step on the gas; below 0.5, fix the engine before adding fuel.
It measures net new ARR against prior-period sales and marketing spend, so it captures efficiency with the natural lag between spending and revenue.
Short answer
A good SaaS magic number is 0.75 or higher, which signals that sales and marketing spend is producing recurring revenue efficiently enough to justify investing more. Between 0.5 and 0.75 is acceptable but watch it. Below 0.5 means your go-to-market is inefficient and you should fix conversion before adding spend.
Key takeaways
- 0.75 or higher means efficient growth; invest more.
- 0.5 to 0.75 is acceptable but worth watching.
- Below 0.5 means fix efficiency before adding spend.
- It reflects spend-to-revenue with a one-period lag.
Reading the magic number
Above 0.75, each dollar of sales and marketing is producing enough new ARR that pouring in more is justified. Between 0.5 and 0.75, growth is real but not clearly worth accelerating. Below 0.5, you are buying revenue inefficiently and adding spend would waste it.
The magic number is a go-to-market metric, not a whole-company one. Pair it with the burn multiple, which captures total burn, for a complete efficiency picture.
How Ardovo handles it
Ardovo computes the magic number from live ARR movement and connected spend with the correct lag. Rook tells you whether the number supports leaning into spend or signals an efficiency problem to fix first, so growth decisions rest on evidence.
Frequently asked questions
What is a good magic number?
0.75 or higher signals efficient growth and a case to invest more. Between 0.5 and 0.75 is acceptable but worth watching. Below 0.5 means your go-to-market is inefficient and you should fix conversion before adding spend.
What does a magic number above 1 mean?
It means each dollar of prior sales and marketing spend produced more than a dollar of net new ARR, which is highly efficient. It strongly supports increasing investment, though few companies sustain it as they scale.
How is the magic number different from the burn multiple?
The magic number measures only sales and marketing efficiency, while the burn multiple uses total company burn. Use the magic number for go-to-market decisions and the burn multiple for overall growth efficiency.