How do I use CAC payback and magic number to decide whether to hire more reps?
Treat them as a gate, not a target. If your magic number is comfortably above one and CAC payback is under twelve months, the machine is returning more than you feed it and hiring is the obvious use of cash. Between about 0.5 and 0.75, adding reps mostly buys you a bigger, slower version of the same problem, so fix productivity first. Below 0.5, hiring makes things worse. Two adjustments people forget: measure spend in the period before the revenue it produced, since a rep hired today produces nothing for two quarters, and use fully ramped productivity rather than team average, otherwise every new hire silently drags the ratio down and you conclude the market is saturated when you have simply hired too fast.
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Separates gross sales efficiency, net sales efficiency and magic number, which most people use interchangeably and should not. Also sets the 0.7 long run median you will be judged against.
The magic number was invented at Scale, so this is the primary source, including the Omniture story behind the name and how the benchmark has drifted since 2005.
Lays out Upekkha's Value SaaS argument that SaaS built from India is structurally capital efficient, which changes what a healthy CAC payback or magic number looks like for an Indian company.
The question is whether the machine returns more than you feed it before you add reps, and this episode works through unit economics as the gate for that decision rather than as a reporting metric.
