What is a good SaaS magic number?
The SaaS magic number measures sales efficiency: net new ARR in a period ÷ sales & marketing spend in the prior period. Above 0.75 is healthy — strong return on go-to-market spend. Below 0.5 suggests acquisition is inefficient. Product-led and early-stage companies read it differently, since much growth is organic.
What is magic number?
Magic number = net new ARR ÷ prior-period sales & marketing spend. A value of 1 means each euro of S&M generated a euro of new recurring revenue within the period.
Magic number reference
| Segment / stage | Healthy | Red flag |
|---|---|---|
| Healthy | > 0.75 | — |
| Acceptable | 0.5-0.75 | — |
| Inefficient | — | < 0.5 |
How to improve your magic number
- Lean on organic channels (SEO, content, referrals) that lower S&M spend.
- Improve conversion so the same spend yields more new ARR.
- Watch the lag: this period’s ARR comes from last period’s spend.
FAQ
Does the magic number work for product-led growth?
Less cleanly. PLG growth is largely organic, so S&M spend is low and the ratio can look unusually high or noisy. Treat it as one signal among several.
What is a bad magic number?
Below 0.5 generally means you are spending inefficiently on acquisition — it takes more than two euros of S&M to buy a euro of new ARR.
See where your numbers land.
Startkeel checks your magic number against these ranges and tells you if your SaaS holds up.
Last updated: June 25, 2026. Ranges based on Startkeel’s benchmark set for early-stage SaaS. For information only — not financial advice.