What is the norm for a “rainy days” bank buffer, considering payroll, rent, and everything in-between?

The best rule I’ve learned in SaaS is the “50% of your ARR on the balance sheet” rule.

If you have > 50% of your ARR in cash, in the bank, that’s usually enough to make the key accretive investments you need to make in people, infrastructure and marketing,

If you are at $10m ARR, you need at least $5m in the bank to comfortable hire the say 50+ folks you’ll need to hire the next year. People aren’t cheap.

Etc. etc.

You can run it leaner. I had $2m in the bank at $10m ARR. But it wasn’t enough to protect vs. a systematic shock. A patent troll. A loss of a critical VP and part of her team. Etc. I needed 50%+ myself.

60% is even better.

The last thing you want to do in SaaS is not make accretive hires. More on that here: At About $2m in ARR, Every Great Hire Will Be Accretive. | SaaStr

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Published on February 18, 2019

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