What is SaaS Magic Number (MN)?

SaaS Magic Number (or simply MN) is a metric that measures how effectively a Software-as-a-Service firm is increasing its recurring revenue compared to the overall cost of its marketing and sales efforts.

In simple words, MN shows how quickly a company’s investment in sales and marketing will pay off in the form of revenue.

The best result for a SaaS business is 1.0, which means that the investment will return in the span of a year.

To calculate the SaaS Magic Number, businesses use the following formula: the recurring revenue from the last quarter – the recurring revenue from the quarter before the last one * 4 and divided by the total cost of sales and marketing from the quarter before the last one.

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