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Burn Multiple Calculator
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Burn multiple = net burn / net new ARR for the same period. A company that burns $500K in a quarter while adding $250K of net new ARR has a burn multiple of 2.0 — it's spending $2 for every $1 of new recurring revenue. Lower is better: under 1x is exceptional, 1x-1.5x is efficient, 1.5x-2x is average, 2x-3x needs attention, and above 3x is a red flag for most stages. This calculator returns your score instantly from two inputs.
Your burn multiple
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How burn multiple is calculated
Burn multiple = net burn ÷ net new ARR, both measured over the same period (usually a quarter). Net burn is cash out minus cash in; net new ARR is the change in annual recurring revenue over that period, including expansion and net of churn.
A company that burns $500,000 in a quarter and adds $250,000 of net new ARR has a burn multiple of 500,000 / 250,000 = 2.0x — it spends $2 in cash for every $1 of new recurring revenue it generates.
What counts as a good burn multiple
Popularized by investor David Sacks, the commonly cited bands are: under 1x is exceptional (rare, usually later-stage or capital-efficient companies), 1x-1.5x is efficient, 1.5x-2x is good, 2x-3x needs attention, and above 3x is a red flag outside of very early-stage, pre-product-market-fit companies.
Burn multiple pairs well with growth rate: a high multiple at $1M ARR growing 3x/year is far less concerning than the same multiple at $20M ARR growing 20%/year, since early-stage spend often buys learning and product-market fit, not just revenue.
FAQ
Questions
What is a good burn multiple?
Under 1x is exceptional, 1x-1.5x is efficient, 1.5x-2x is good/average, 2x-3x needs attention, and above 3x is generally a red flag — except at very early stages where higher burn multiples are more tolerated while a company is still finding product-market fit.
Is burn multiple the same as burn rate?
No. Burn rate is simply how much cash a company spends per month or quarter. Burn multiple relates that spend to the recurring revenue it produced (net burn ÷ net new ARR), so it measures efficiency, not just spend.
Should net new ARR include churn?
Yes — net new ARR should be net of churn and contraction, not just new bookings. Using gross new ARR instead of net will understate your true burn multiple and make efficiency look better than it is.
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