Magic number is a SaaS sales efficiency metric comparing new annualized recurring revenue generated in a quarter against the sales and marketing spend from the prior quarter, a rough measure of how efficiently a company converts sales spend into growth.
A magic number above roughly 0.75 to 1 is generally read as a sign the company is efficient enough to justify increasing sales and marketing investment further. A number well below that suggests spend isn't converting to new revenue efficiently yet, and pouring more money into the same motion is unlikely to fix that on its own.
Like burn multiple, this metric is most meaningful once a company has an established, repeatable sales motion. It's noisy and less useful very early on, when a small number of deals can swing the ratio dramatically in either direction regardless of the underlying sales efficiency.
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