Burn Multiple vs SaaS Magic Number
What is the difference between Burn Multiple and SaaS Magic Number? Side-by-side definitions, formulas, and benchmarks for two of the most-watched SaaS metrics.
Definitions
What is Burn Multiple?
Burn Multiple measures capital efficiency by comparing net burn against net new ARR over a period.
Full Burn Multiple definition →
What is SaaS Magic Number?
The SaaS Magic Number measures sales efficiency: how many dollars of new annual recurring revenue each dollar of sales and marketing spend generates, using prior-quarter spend to respect the lag between spend and revenue.
Burn Multiple vs SaaS Magic Number at a Glance
| Burn Multiple | SaaS Magic Number | |
|---|---|---|
| Category | Metrics | Metrics |
| Formula | Burn multiple = Net Burn / Net New ARR over a time period | Magic Number = Net New ARR in Quarter / S&M Spend in Prior Quarter |
| Benchmarks | — | good: 0.75 x; great: 1 x |
| Calculator | Burn Multiple calculator | SaaS Magic Number calculator |
When Each Matters
Burn Multiple and SaaS Magic Number answer different questions. Burn Multiple measures capital efficiency by comparing net burn against net new ARR over a period. The SaaS Magic Number measures sales efficiency: how many dollars of new annual recurring revenue each dollar of sales and marketing spend generates, using prior-quarter spend to respect the lag between spend and revenue. In practice, healthy SaaS operators watch both, because each one catches failure modes the other misses.