SaaS Magic Number (Contracted)

What it measures

The raw productivity of sales and marketing spend at the booking level. It divides all new contracted ARR — deals signed in the period, whether live or not — by the fully loaded S&M spend in the same period. Unlike the margin-adjusted Sales Magic Number, this view does not net out delivery cost and does not include expansion CARR; it isolates how much brand-new forward revenue each go-to-market dollar locks in, making it a leading indicator of whether the sales engine is buying durable bookings.

Why it matters

Magic Number tells you whether go-to-market is efficient at the contract level. It answers three questions a board cares about: Is every S&M dollar yielding enough new CARR to justify growth investment? Is the growth engine self-funding, or does it need outside capital to keep spending? And how much forward visibility have you bought — a strong number on CARR means revenue is already booked and will flow in over time, lowering execution risk. Because it ties spend directly to bookings, investors treat it as a core test of whether the sales engine works and can be safely dialed up.

How to read it

Read it as a ratio: 0.75 means each dollar of S&M spend yields \$0.75 of new CARR. Higher is better — above 1.0 you are booking more CARR than you spend to acquire it, a rare and powerful signal. Watch the trend more than the level: a declining ratio period over period means either spend is climbing (rising CAC on flat bookings) or bookings are shrinking (market saturation, sales churn, weakening product-market fit). A rising ratio is encouraging when it reflects genuine sales productivity or market expansion, but can mislead when it is driven by one large multi-year deal or temporary bundling. Always decompose: review new logos versus average CARR per logo separately to tell whether the motion is broad-based or lumpy.

What good looks like

Watch-outs

• Reading it without the margin-adjusted or live-ARR view. A strong number on raw CARR can mask poor unit economics if delivery costs are high, or a delivery bottleneck if signed deals aren't going live. Pair it with the Sales Magic Number (margin-adjusted) and a live-ARR efficiency view before acting.
• Annualizing multi-year contracts at TCV instead of annual run-rate. A 3-year, \$300K deal is \$100K of CARR, not \$300K — counting full TCV inflates the ratio and pushes you to overinvest in whichever channel produced that win.
• Mismatching spend and booking periods. A deal signed Sept 28 that closes Nov 1 should be matched to the period it was booked, and long sales cycles can make the metric noisy — use cohort or trailing-spend accounting for enterprise motions so numerator and denominator cover the same effort.
• Using a thin denominator. If you exclude headcount, commissions, tooling, or allocated management cost, you overstate the true number. The denominator must be all-in, fully loaded S&M spend — not just external vendor and campaign costs.

Worked example