Magic Number Calculator for SaaS

At Scale, we have long been believers in the Magic Number as a simple calculation of sales efficiency and a great predictor of future success for subscription based business. One of the main reasons why we like the Magic Number is the fact that it is the easiest to benchmark.  Sure, it has its shortcomings, but being based on GAAP financials, it’s one of the only metrics where you have reasonable assurances that you are comparing apples to apples.

Find Your Magic Number: Magic Number Calculator

Benchmark against top SaaS companies

Now what does this number mean? See how you stack up against the set of public companies in Scale Venture Partners SaaS Index.  Though the companies in the ScaleVP SaaS Index are larger than most startups, the premise of being able to run an efficient distribution engine is universal. 

If your Magic Number is low (< 0.7), think about whether or not you need to make changes to your go-to-market model.

  • Have you segmented your prospects and identified your ideal customer profile?
  • Are you using the right distribution model and routes to market?
  • Do you have sufficient marketing and sales alignment on customer messaging and demand generation?

Conversely, if your Magic Number is high (> 0.7), think about stepping on the gas to accelerate growth. 

  • Can you easily envision yourself adding headcount in a scalable fashion?
  • Do you need to think about adding additional routes to market?
  • Is it time to add additional markets?