SaaS Bessemer Efficiency Score Calculator

Think of the SaaS Bessemer Efficiency Score as a report card for your SaaS company. It shows how well you are balancing growth and spending. A high score means you are getting the most out of your money.

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    Guide Strategic Decisions

    Use the score to guide key strategic decisions by understanding the balance between growth and spending.

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    Boost Operational Efficiency

    Improve daily operations by tracking how efficiently resources are used to generate revenue.

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    Identify Growth Opportunities

    Find opportunities to grow by identifying areas to improve the relationship between spending and revenue.

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SaaS Bessemer Efficiency Score

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The SaaS Bessemer Efficiency Score measures how efficiently a company converts burn into ARR growth. A higher score indicates better capital efficiency.

How to Calculate SaaS Bessemer Efficiency Score

To find your SaaS Bessemer Efficiency Score, please follow these stetps: 

  1. Calculate your Net New ARR. This is the difference between new ARR gained and ARR lost from churn or downgrades in a specific period. For example, if you gained $500,000 in new ARR but lost $100,000 in churned ARR, your Net New ARR would be $400,000.
  2. Determine your Net Burn. This is the amount of money you’ve spent minus your revenue in a given period. For instance, if you spent $600,000 and had $200,000 in revenue, your Net Burn would be $400,000.
  3. Compute your Bessemer Efficiency Score. Using the examples above, $400,000 (Net New ARR) divided by $400,000 (Net Burn) results in a Bessemer Efficiency Score of 1.

Note: A score above 1 is generally considered efficient, while a score below 1 indicates the need for improvement. Be sure to use the same timeframe when calculating Net New ARR and Net Burn.

SaaS Bessemer Efficiency Score = Net New ARR / Net Burn

Understanding SaaS Bessemer Efficiency Score

Ioana Grigorescu

January 21, 2025

What is the Bessemer Efficiency Score?

The Bessemer Efficiency Score helps measure how well your SaaS company grows, by evaluating the use of resources in terms of business metrics. This score combines the revenue growth rate with the profit margin. A higher score indicates more effective utilization of the company’s resources, similar to how a well-tended garden uses water and nutrients efficiently.

  • Assesses financial health by balancing growth and spending for sustainability.

  • Directs strategic investment decisions based on efficient and scalable growth.

  • Informs critical strategic shifts with a periodic review of growth effectiveness.

Practical Examples of Bessemer Efficiency Score

  • Example 1: In the case of Company A which generated a net new ARR of $500,000 with sales and marketing expenses of $400,000, the Bessemer Efficiency Score was notable at 1.25, indicating a favorable return on investment.
  • Example 2: Company B faced a tougher scenario with a net new ARR of $200,000 against sales and marketing investments of $300,000, resulting in a Bessemer Efficiency Score of 0.67. This score suggests inefficient utilization of resources.
  • Example 3: Company C showed efficient resource management with a net new ARR of $750,000 and sales and marketing expenses of $600,000, achieving a Bessemer Efficiency Score of 1.25.
Period New ARR Expansion ARR Churned ARR Total ARR Efficiency Score Period Change % Change Trend Analysis
Q1 2023 500,000 100,000 -50,000 1,000,000 0.55 – – Initial quarter. Efficiency score is at 0.55.
Q2 2023 600,000 150,000 -70,000 1,680,000 0.62 0.07 12.7% Efficiency score increased by 0.07, a positive trend.
Q3 2023 700,000 200,000 -80,000 2,500,000 0.68 0.06 9.7% Efficiency score continues to rise, indicating healthy growth.

SaaS Bessemer Efficiency Score = $820,000 / $1,350,000 = 0.61

Different Ways to Calculate Bessemer Efficiency Score

  • Standard Bessemer Efficiency Score: Calculated as the new ARR plus expansion ARR divided by the total burn. This standard measure of growth is used to benchmark performance against other companies in the same industry.
  • Net New ARR Efficiency Score: Focused on the new ARR growth rate, calculated as new ARR divided by the total burn. Useful for companies aiming to grow their customer base.
  • Gross Revenue Efficiency Score: Total ARR divided by the total burn, showing the effectiveness of the collected revenue. Beneficial for investors interested in general revenue efficiency.
  • Efficiency Score with CAC Payback: New ARR plus expansion ARR divided by the total burn and customer acquisition costs (CAC), offering a comprehensive view of efficiency.

How to Improve Your Bessemer Efficiency Score

  • Increase Customer Lifetime Value (CLTV): Implement a customer loyalty program to encourage repeat purchases and look for opportunities to upsell and cross-sell to enhance each customer’s value.
  • Reduce Customer Acquisition Cost (CAC): Invest time into inbound marketing strategies like content marketing and SEO to attract customers without direct costs.
  • Optimize Sales Cycle Length: Examine your sales process for bottlenecks and implement a CRM system to better manage leads and improve communication with potential customers.
  • Improve Customer Retention: Engage actively with customers by conducting regular check-ins, providing support, and swiftly addressing any issues that arise.
  • Increase Annual Recurring Revenue (ARR): Offer an annual subscription at a discounted rate to encourage longer commitment periods or promote additional product sales.
  • Measure Your Progress: Regularly review your Bessemer Efficiency Score and its influencing factors, adjusting your strategies accordingly to optimize results.

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