The method
How it is worked out
Magic number = (revenue this quarter − last quarter) × 4 ÷ last quarter's sales and marketing spend
- margin-adjusted
- Magic number × gross margin
SaaS Magic Number Calculator
Compute the SaaS magic number from quarterly revenue growth and prior-quarter spend, and decide whether to invest more in sales. The result updates as you type so you can compare scenarios quickly.
Keep in mind
What it leaves out
- SeasonalityQuarter-to-quarter swings distort a single reading; use a trailing average.
- Long sales cyclesEnterprise deals may land two quarters after the spend.
- ChurnThe number reads net revenue change, so churn drags it down.
Use the calculator to compare scenarios rather than as a guaranteed forecast.
About the SaaS Magic Number Calculator
Compute the magic number from this quarter's revenue growth and last quarter's sales and marketing spend, then decide whether to increase, hold or cut growth investment.
How it works and an example to tryShow less
How to use the result
The magic number is the quarter-on-quarter revenue increase, annualised by multiplying by four, divided by the previous quarter's sales and marketing spend. A margin-adjusted version multiplies by gross margin. Implied payback is twelve divided by the magic number.
Example to try
Revenue rising from £1.2m to £1.4m after £600,000 of spend gives a magic number of 1.33: each pound of spend created £1.33 of annual revenue within a quarter, an implied nine-month payback. Increase the budget.
Put it to work
Try it on a real situation
Load an example
What moves the result most
Worked out from your figures above. Tap a row to try it.
Who uses it, and when
SaaS finance teams and founders, board members reviewing efficiency and investors comparing portfolio companies.
Mistakes worth avoiding
- Reading one quarter in isolation when the business is seasonal.
- Ignoring that long sales cycles delay the revenue past the next quarter.
- Forgetting churn is netted into the revenue change.
Questions
What does the SaaS Magic Number Calculator do?
Compute the SaaS magic number from quarterly revenue growth and prior-quarter spend, and decide whether to invest more in sales.
How should I use the result?
The magic number is the quarter-on-quarter revenue increase, annualised by multiplying by four, divided by the previous quarter's sales and marketing spend. A margin-adjusted version multiplies by gross margin. Implied payback is twelve divided by the magic number.
Does TechBullion store the information I enter?
The core calculation or transformation runs in your browser. Normal website security and analytics may still record page-level events, but the tool does not need to create a public record from your inputs.
What mistakes do people make with a saas magic number calculator?
Reading one quarter in isolation when the business is seasonal. Ignoring that long sales cycles delay the revenue past the next quarter. Forgetting churn is netted into the revenue change.
Is the result guaranteed?
No. Use the result as a practical check or planning aid and verify important decisions with the relevant primary source, provider or professional advice.
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Results are estimates based on the figures entered, for general information only, and not financial, investment, tax or legal advice. See our terms of use.