Skip to content

Cash Conversion Score (CCS)

Updated Mar 17, 2025By Alamin Mollick

What is Cash Conversion Score? 

Cash Conversion Score is used by investors to measure the return on invested capital for startups. It is calculated by dividing current ARR by the difference between total raised capital and cash on hand. Essentially, this metric gives the return on each dollar invested in a company.

Also known as ARR to Capital Ratio

Cash Conversion Score Formula

Formula

Sum(ARRDescription: Annual Recurring Revenue (ARR) is a key financial metric representing the value of a business's repeatable, predictable subscription income normalized over a 12-month period. It quantifies the expected yearly revenue a subscription business, particularly those with contracts of a year or longer, can count on from its current customer base. The metric is calculated by annualizing all active, contractually committed subscriptions, excluding one-time fees, professional services, or variable usage charges. ARR is crucial for long-term forecasting, capital allocation, and business valuation, as it highlights the stability and scale of the subscription revenue stream.) / ( Sum(Capital Raised to Date) - Sum(Cash on HandDescription: Cash and Cash Equivalents (CCE) is the total value of a company's cash on hand plus short-term liquid assets convertible to cash within three months. CCE appears as the first line item on a company's balance sheet and is a primary indicator of liquidity. A strong CCE balance signals the ability to meet operating obligations, service short-term debt, and fund growth without external financing.) )

How to calculate Cash Conversion Score

Say a company has generated ARR of $9 million by the end of the year, with $11 million capital raised and $3 million cash at hand. In this scenario, the company's Cash Conversion Score would be 1.1, often denoted as 1.1x meaning that the company saw a return of $1.1 dollars for each dollar invested.

Start tracking your Cash Conversion Score data

Build and track this metric in PowerMetrics, a modern analytics platform that lets you define metrics and connect your own data.

Get PowerMetrics Free

What is a good Cash Conversion Score benchmark?

Bessemer provides guidance around benchmarks for CCS: Good: 0.25-0.5x Better: 0.5-1x Best: 1x+

Cash Conversion Score benchmarks

Cash Conversion Score Benchmarks

Cash Conversion Score Benchmarks
Bessemer Venture Partners, 2019

ARR to Capital Raised Ratio

Arr Capital Ratio by Revenue Benchmarkit2023
Benchmarkit, 2023

How to visualize Cash Conversion Score?

The best approach to visualizing Cash Conversion Score is through a summary chart. You can then compare the current value to a previous time period.

Cash Conversion Score visualization example

Cash Conversion Score

1x

0.49

vs previous period

Powered ByPowerMetrics by Klipfolio

Summary Chart

Here's an example of how to visualize your current Cash Conversion Score data in comparison to a previous time period or date range.

More about Cash Conversion Score

Originally founded by Bessemer Venture Partners, Cash Conversion Score (CCS) was created to provide a measure of return on invested capital for cloud businesses. It is a helpful indicator for value creation and also used operationally, for founders and management teams to understand their efficiency in turning capital into Annual Recurring Revenue (ARR). It is impossible to have a high CCS without strong product/market fit and a scalable sales and marketing model.

Cash Conversion Score is calculated by dividing the current ARR by the difference between Total Capital Raised to Date and Cash on Hand, where Total Capital Raised to Date = Equity + Debt.

Recommended resources related to Cash Conversion Score