Burn Multiple Calculator
Calculate the burn multiple — net cash burned per dollar of net new ARR — the capital efficiency metric that reveals how expensively a business is buying its growth.
🔥 SaaS Metrics📐 Burn multiple = net cash burned / net new ARR💼 Business
Net cash burned in period
Net new ARR added in period
Current ARR (for context)
Cash on hand (for runway)
Please enter valid values.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Burn Multiple Calculator | — | Burn multiple = net cash burned / net new ARR | ratio |
Step-by-Step Examples
Example 1
Good Efficiency
Burned 1,200,000, added 800,000 net new ARR, current ARR 5,000,000.
- Burn multiple = 1,200,000 / 800,000
- Burn multiple = 1.50x
- Growth rate = 800,000 / 5,000,000 = 16.0%
✓ 1.50x — good
Example 2
Exceptional
Burned 400,000, added 600,000 net new ARR.
- Burn multiple = 400,000 / 600,000 = 0.67x
- Each dollar burned generated 1.50 of new ARR
- Under 1x is rare and genuinely strong
✓ 0.67x — amazing
Example 3
Expensive Growth
Burned 3,000,000, added 750,000 net new ARR.
- Burn multiple = 3,000,000 / 750,000 = 4.0x
- Four dollars burned per dollar of new recurring revenue
- Efficiency needs addressing before raising more capital
✓ 4.0x — bad
Real-World Applications
Capital Efficiency
Burn multiple captures total cash consumption against growth, making it harder to game than metrics focused on a single spend category.
Downturn Relevance
The metric gained prominence as capital became more expensive and efficient growth started mattering more than growth at any cost.
Fundraising Context
Investors use burn multiple to assess whether additional capital will be deployed productively.
Whole-Business View
Unlike CAC or the magic number, it includes product, engineering, and overhead — everything consuming cash.
Common Mistakes to Avoid
⚠️
Comparing burn multiple across very different stages
Early-stage companies with tiny ARR bases naturally show poor multiples. The metric becomes meaningful once there is a real revenue base to grow from.
⚠️
Using gross rather than net burn
Net burn after revenue is the correct input. Gross burn ignores the cash the business actually generates and overstates the multiple.
⚠️
Optimising the multiple by simply cutting growth
Slashing spend improves the ratio while shrinking the business. The metric is about efficiency of growth, not minimising burn in isolation.
Frequently Asked Questions
What is the burn multiple? ▾
Net cash burned divided by net new ARR added over the same period — measuring how much cash is consumed per dollar of new recurring revenue.
What is a good burn multiple? ▾
Under 1x is exceptional, 1 to 1.5x great, 1.5 to 2x good, 2 to 3x suspect, and above 3x generally considered poor.
How is it different from the magic number? ▾
The magic number looks only at sales and marketing spend. Burn multiple includes all cash consumption, giving a whole-business efficiency view.
Should I use gross or net burn? ▾
Net burn — cash out minus cash in. Gross burn ignores revenue and systematically overstates how inefficient the business is.
Why did this metric become popular? ▾
It gained prominence when capital costs rose and investors shifted from rewarding growth at any cost to rewarding efficient growth.