Article · 8 min read

How to Calculate the SaaS Magic Number

Ben Murray · The SaaS CFO Free Advanced

One number that tells you whether your whole GTM spend is working, with current benchmark bands (under 0.5 underinvesting, 0.75 to 1.0 efficient, over 1.0 exceptional) and the precise definition of what to include in the spend.

  • Magic number = (this quarter's ARR minus last quarter's ARR) times 4, divided by last quarter's sales and marketing spend.
  • Above 0.75 means step on the gas; 1.0 or better is the efficient zone.
  • A magic number of 1.0 implies you paid back customer acquisition cost inside a year.
  • It only reads true on short sales cycles: with a 12 month enterprise cycle, use trailing twelve month figures instead.
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The question it answers

  1. How much should the whole GTM org cost, and how do I know when we are overspending?

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