Burn multiple calculator for SaaS
Enter your net burn and net new ARR to measure capital efficiency - how many dollars you burn to add one dollar of new recurring revenue.
Burn multiple calculator
Enter your net burn and net new ARR for the same period. Burn multiple = net burn / net new ARR.
Use net burn and net new ARR from the same window. We don't auto-annualize.
Cash out minus cash in (operating) for the period.
New + expansion - churned - contraction, in ARR terms.
Net burn and net new ARR are required.
Quick answer: The burn multiple measures SaaS capital efficiency - net cash burned divided by net new ARR over the same period. It tells you how many dollars you burn to add one dollar of new recurring revenue, so lower is better. As a rough guide, under 1.5x is strong and above 3x signals inefficient growth. The metric was popularised by investor David Sacks.
How the burn multiple works
The formula is one line: burn multiple = net burn / net new ARR, both measured over the same window. A company that burned $2M in a quarter while adding $1M of net new ARR has a burn multiple of 2.0x - it spent two dollars for every dollar of new recurring revenue. Unlike raw burn rate, the burn multiple rewards efficient growth: spend whatever you like, as long as it converts into ARR.
Benchmark bands
| Burn multiple | Rating | What it means |
|---|---|---|
| Under 1.0x | Amazing | Elite capital efficiency; rare and highly fundable |
| 1.0x - 1.5x | Great | Top-quartile efficient growth |
| 1.5x - 2.0x | Good | Healthy for most growth-stage SaaS |
| 2.0x - 3.0x | Suspect | Spending heavily per dollar of new ARR |
| Above 3.0x | Needs attention | Inefficient burn relative to ARR added |
Bands are a widely cited guide popularised by David Sacks. Definitions of net burn and net new ARR vary between companies, so treat them as directional, not absolute.
How to calculate your burn multiple (step by step)
- Pick a period - month, quarter, or year - and use figures from that same window.
- Enter net burn - operating cash out minus cash in for the period.
- Enter net new ARR - new + expansion - churned - contraction, in ARR terms.
- Divide - net burn / net new ARR is your burn multiple.
- Compare - see which benchmark band you land in and act on the gap.
Why investors care about the burn multiple
The burn multiple compresses the central question of venture-stage SaaS - is this growth worth the cash it consumes? - into a single number. A company growing fast on enormous burn can look impressive on a top-line chart yet be deeply inefficient underneath; the burn multiple exposes that. Since the shift toward capital efficiency from 2022 onward, boards and investors lean on it heavily because it's hard to game: you can't flatter it without either burning less or producing more net new ARR. It pairs naturally with runway (how long the cash lasts) and the Rule of 40 (growth-plus-margin balance) for a fuller picture of financial health.
How to improve your burn multiple
- Lift net new ARR: sharpen acquisition, grow expansion revenue, and cut churn so more of each dollar burned becomes durable ARR.
- Trim inefficient burn: cut spend that isn't producing ARR - over-hiring ahead of need, low-ROI channels, tooling sprawl.
- Protect retention: churn and contraction shrink net new ARR directly, so retention is often the fastest lever on the ratio.
Frequently asked questions
- What is the burn multiple?
- Net cash burned divided by net new ARR over the same period - how many dollars you burn to add one dollar of new recurring revenue. Lower is better.
- What is a good burn multiple?
- Under 1.0x is amazing, 1.0-1.5x great, 1.5-2.0x good, 2.0-3.0x suspect, and above 3.0x needs attention.
- Monthly, quarterly, or annual?
- Use net burn and net new ARR from the same window. Don't mix periods or auto-annualize one side.
- Burn multiple vs cash burn rate?
- Burn rate is how much you spend; the burn multiple relates that spend to the net new ARR it produced, measuring efficiency.
- What if net new ARR is zero or negative?
- The ratio is undefined - you're burning cash without adding net recurring revenue, a signal to fix retention and acquisition first.
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