Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
Magic number
0.77
Gross-margin-adjusted magic number
0.60
Net new ARR this quarter
$400,000
CAC payback (months, gross profit basis)
20.0
Annualised return per S&M dollar
3.08
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Got your number — what next?
Pick one, it takes 20 secondsHow to use this
- 1Enter current quarter ending arr ($).
- 2Enter prior quarter ending arr ($).
- 3Enter prior quarter s&m spend ($).
- 4Enter gross margin (%).
- 5Read your magic number on the right — it updates as you type.
- 6Hit Share to keep the scenario or send it to someone.
About this calculator
The magic number compares net new annualised recurring revenue in a quarter to the sales and marketing spend of the prior quarter, answering one question: does another dollar into go-to-market return a dollar of ARR quickly enough to justify it? Above 0.75 is generally read as a green light to spend harder; 0.5 to 0.75 says tune before scaling; below 0.5 means adding spend makes the unit economics worse, not better. This calculator computes both the classic magic number and the implied payback period in months, which is the version most operators actually act on.
Worked example
Using the values the calculator loads with:
Inputs
- Current quarter ending ARR: 4200000 $
- Prior quarter ending ARR: 3800000 $
- Prior quarter S&M spend: 520000 $
- Gross margin: 78 %
Results
- Magic number: 0.77
- Gross-margin-adjusted magic number: 0.6
- Net new ARR this quarter: $400,000.00
- CAC payback (months, gross profit basis): 20
- Annualised return per S&M dollar: 3.08
What each field means
Inputs
- Current quarter ending ARR ($)
- The current quarter ending arr used in the calculation, measured in $. Starts at 4200000 $ so you have a working example on load.
- Prior quarter ending ARR ($)
- The prior quarter ending arr used in the calculation, measured in $. Starts at 3800000 $ so you have a working example on load.
- Prior quarter S&M spend ($)
- The prior quarter s&m spend used in the calculation, measured in $. Starts at 520000 $ so you have a working example on load.
- Gross margin (%)
- The gross margin used in the calculation, measured in %. Starts at 78 % so you have a working example on load. Accepted range: 1–100 %.
Results
- Magic number
- Returned as a decimal number and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Gross-margin-adjusted magic number
- Returned as a decimal number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Net new ARR this quarter
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- CAC payback (months, gross profit basis)
- Returned as a decimal number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Annualised return per S&M dollar
- Returned as a decimal number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
Why use last quarter's spend against this quarter's ARR?
Because sales and marketing spend takes time to convert. Lagging the spend by one quarter roughly matches typical B2B sales cycles; if yours runs six months or more, lag by two quarters instead or the number will look worse than reality.
What magic number should I aim for?
0.75+ is the common 'spend more' threshold, above 1.0 is excellent and usually means you're underinvesting in growth, and below 0.5 signals a go-to-market efficiency problem to fix before adding budget.
Should net new ARR include expansion?
Use net new ARR including expansion and net of churn if you want the honest efficiency picture, since retention spend often sits inside the S&M line. Some teams also compute a new-logo-only version to separate acquisition efficiency from expansion efficiency — both are useful, just label which you're reporting.
How does it relate to CAC payback?
They're two views of the same thing. Magic number is the return per dollar; payback converts it into time. A magic number near 0.75 with 78% gross margin corresponds to roughly 20 months payback, which is at the upper edge of healthy for mid-market SaaS.
Accuracy and limitations
- Results are estimates before tax, fees, and inflation unless an input explicitly covers them.
- Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.
- This is educational maths, not financial advice. Check anything contractual with the lender or your accountant.
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Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). SaaS Magic Number Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/saas-magic-number
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/saas-magic-number" target="_blank" rel="noopener">SaaS Magic Number Calculator — RevenueLab</a> (2026).</p>
Source: [SaaS Magic Number Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/saas-magic-number) (2026).