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Burn Multiple Calculator

Measure how efficiently a startup turns cash into growth. Enter net burn (or cash balances) and net new ARR for the same period to get the burn multiple, its efficiency band, ARR added per dollar burned, monthly burn and runway.

Last updated:

Net burn from
$

Operating cash out − cash in (exclude funding raised)

$
$
$

Added back so fundraising does not hide burn

$

New + expansion − churned − contraction ARR

Optional
$
$
Enter your values to see the result.
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How to use the Burn Multiple Calculator

  1. Pick the period (month, quarter or trailing 12 months) and use it for both inputs.
  2. Enter net burn, or switch to cash balances and enter starting cash, ending cash and any funding raised.
  3. Enter net new ARR: new plus expansion minus churned and contraction ARR.
  4. Optionally add starting ARR and cash on hand for growth and runway.
  5. Press Calculate burn multiple to see the multiple, its rating and the target table.

Burn multiple formula

Burn multiple = net burn ÷ net new ARR (both for the same period)

  • Net burn = starting cash − ending cash + equity or debt raised in the period
  • Net new ARR = new ARR + expansion ARR − churned ARR − contraction ARR

Example: a company burns $1,500,000 in a quarter and grows ARR from $6,000,000 to $7,000,000. Its burn multiple is $1,500,000 ÷ $1,000,000 = 1.5×, just at the start of the good band (great is under 1.5×). To reach 1× with the same burn it would need $1,500,000 of net new ARR, or it could cut burn to $1,000,000.

Burn multiple benchmarks

Burn multipleRatingWhat it suggests
Under 1×AmazingEach dollar burned adds more than a dollar of ARR
1× – 1.5×GreatEfficient, fundable growth
1.5× – 2×GoodHealthy but worth watching sales and marketing efficiency
2× – 3×SuspectGrowth is costly; check CAC payback and churn
Over 3×BadSpending is far ahead of results

Scale from David Sacks' 2020 essay on the burn multiple; treat it as a rule of thumb, not a hard standard.

Ways to improve a burn multiple

  • Reduce churn and contraction: retained ARR raises net new ARR without extra spend.
  • Grow expansion revenue from existing customers, which is usually cheaper than winning new logos.
  • Shorten CAC payback by focusing spend on the channels and segments with the best conversion.
  • Look at quarterly or trailing-12-month figures; a single month can swing on one large deal or annual prepayments.

Frequently asked questions

What is the burn multiple?

The burn multiple is net burn divided by net new annual recurring revenue (ARR) over the same period. It tells you how many dollars of cash a company burns to add one dollar of ARR. Lower is better: a burn multiple of 1.5× means $1.50 of burn for every $1 of net new ARR.

What is a good burn multiple?

On the scale popularized by investor David Sacks, under 1× is amazing, 1× to 1.5× great, 1.5× to 2× good, 2× to 3× suspect and above 3× bad. Very early companies often run higher multiples while finding product-market fit, and investors expect the multiple to fall as the company scales.

How do you calculate net burn?

Net burn is cash spent minus cash received from operations in a period, excluding money raised from investors or lenders. A simple method is starting cash minus ending cash, plus any equity or debt raised during the period. For example, $12M − $10.5M = $1.5M of net burn in a quarter with no fundraising.

What is net new ARR?

Net new ARR is the change in ARR over the period: new customer ARR plus expansion ARR, minus churned and contraction ARR. If ARR went from $6.0M to $7.0M during the quarter, net new ARR is $1.0M.

What if net new ARR is zero or negative?

Then the burn multiple is undefined or effectively infinite: the company is spending cash without growing recurring revenue, which is the worst possible efficiency. If net burn is zero or negative, the company is cash-flow positive and the burn multiple is not a concern.

How is the burn multiple different from the Rule of 40?

The burn multiple focuses on cash efficiency of growth (burn per dollar of new ARR), while the Rule of 40 adds revenue growth rate and profit margin to check the balance between growth and profitability. Many investors look at both, along with the SaaS quick ratio and CAC payback.

Are all the tools on FreeToolCabin tested for quality and accuracy?

Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.

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