Burn Multiple Calculator

Net burn = cash spent minus cash collected in the period (use 0 or a negative number if you were cash-flow positive). Net new ARR = ARR at period end minus ARR at period start, including expansion and net of churn. Pick any consistent period — a quarter is the usual choice.

What the burn multiple actually tells you

Burn multiple is net burn divided by net new ARR over the same stretch of time: net burn ÷ net new ARR. It answers one narrow question — how many dollars of cash does it cost you to add one dollar of new annual recurring revenue? A burn multiple of 1 means a dollar of cash bought a dollar of new ARR; a burn multiple of 3 means it took three dollars of cash to buy that same dollar.

Unlike the runway & burn rate calculator, which tells you how much time is left before the cash runs out, burn multiple tells you how efficiently that cash is being converted into growth — two companies can have identical burn rates and wildly different burn multiples if one is growing ARR twice as fast on the same spend. If burn multiple looks off, the Magic Number calculator can help isolate whether the problem is sales & marketing efficiency specifically, versus burn everywhere else in the business.

How to read the number

• Under 1: excellent — you're adding more than a dollar of new ARR for every dollar burned.
• 1 to 2: good, the range most efficient growth-stage SaaS companies land in.
• 2 to 3: suspect — worth digging into whether spend is going toward durable growth or one-off pushes.
• Above 3: bad — cash is buying very little durable ARR relative to what's being spent.

Common mistakes

• Comparing burn multiples across wildly different revenue scales — a very early, pre-product-market-fit company will often run a high burn multiple for a quarter or two while it's still finding what works; that's a different situation than a company with years of revenue running the same number.
• Using gross new ARR (new sales only) instead of net new ARR (new sales minus churn and downgrades, plus expansion) — leaving churn out flatters the number and hides the real trend.
• Judging a single period in isolation. Burn multiple is noisy quarter to quarter (one big renewal or one slow sales month swings it a lot) — look at the trend over two or three periods, not one snapshot, and pair it with the Rule of 40 calculator for the profitability side of the same story.

Frequently asked questions

What's considered a good burn multiple?

Under 1x is excellent — you're adding more than a dollar of new ARR for every dollar burned. 1x–2x is good, the range most efficient growth-stage SaaS companies land in. Above 3x is bad — cash is buying very little durable ARR.

How is burn multiple different from runway?

Runway tells you how much time is left before cash runs out. Burn multiple tells you how efficiently that cash is converting into growth — two companies can have identical burn rates and wildly different burn multiples if one is growing ARR twice as fast on the same spend.

Should I use gross or net new ARR in the calculation?

Net new ARR — new sales minus churn and downgrades, plus expansion. Using gross new ARR (new sales only) leaves churn out, which flatters the number and hides the real trend.