Magic Number
A SaaS efficiency metric measuring how much new revenue is generated per dollar of sales and marketing spend.
Definition
Magic Number = (Current Quarter Revenue - Previous Quarter Revenue) x 4 / Previous Quarter Sales & Marketing Spend. A magic number above 0.75 indicates efficient growth and signals it's time to invest more in sales and marketing. Between 0.5-0.75 is acceptable. Below 0.5 means your go-to-market is inefficient and needs optimization before scaling.
The magic number captures the full-funnel efficiency of your go-to-market motion, from awareness through close. It's more holistic than individual channel metrics.
Why it matters for founders
The magic number tells you whether to step on the gas or pump the brakes on sales and marketing spend. It prevents the common mistake of scaling an inefficient go-to-market engine, which just produces bigger losses faster.
Example
A SaaS company's Q2 revenue is $2M, Q1 was $1.5M, and Q1 sales & marketing spend was $800K. Magic Number = ($2M - $1.5M) x 4 / $800K = $2M / $800K = 2.5. This exceptional efficiency signals aggressive investment in S&M is warranted.
How Foundra helps
Foundra helps early-stage founders test go-to-market efficiency at small scale before committing major resources, optimizing for magic number before scaling.
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Related terms
Customer Acquisition Cost (CAC)
The total cost to acquire one new customer.
Rule of 40
A SaaS benchmark stating that growth rate plus profit margin should equal or exceed 40%.
Monthly Recurring Revenue (MRR)
The predictable revenue your business generates every month from subscriptions.
Return on Ad Spend (ROAS)
The revenue generated for every dollar spent on advertising.