Burn multiple calculator: net burn ÷ net new ARR
Burn multiple measures how much cash a startup burns to add each dollar of annual recurring revenue. Divide net burn by net new ARR for the same period; the lower the result, the more efficient the growth.
Burn multiple = Net burn ÷ Net new ARR
Net burn = Cash spent − Cash received
Net new ARR = ARR at end of period − ARR at start of period
Burn multiple calculator
Use the same period for both inputs, for example one quarter. Net burn is cash spent minus cash received. Net new ARR is ARR at the end of the period minus ARR at the start.
Burn multiple = Net burn ÷ Net new ARR. Lower is more efficient.
Worked example: burn multiple
David Sacks's example from The Burn Multiple: a startup reports that it burned $2M in the quarter while adding $1M to its ARR.
Burn multiple = $2,000,000 ÷ $1,000,000 = 2.0×
Sacks calls 2× reasonable for an early-stage startup. If the same company had burned $5M to add $1M of net new ARR, the burn multiple would be 5×, which he calls terrible. The calculator above is pre-filled with the 2× example.
Why burn multiple matters
Burn multiple puts burn in the context of growth. Sacks flipped Bessemer's Efficiency Score (net new ARR ÷ net burn) so the focus is on burn: the higher the multiple, the more the company is burning to achieve each unit of growth. It works for any period, a month, a quarter or a year, as long as both inputs cover the same period.
Net burn is covered in detail in What is your business's burn rate?, including gross vs net burn and how to work out runway.
How to get the inputs from Baremetrics
Baremetrics doesn't report burn multiple directly, because burn is a cash figure rather than a billing one. It does give you the denominator: Annual Run Rate is MRR × 12, so net new ARR is the change on your ARR chart between the start and end of the period, and Compare Date Ranges shows it side by side. For the burn side, Forecast+ builds profit and loss, balance sheet and cash flow statements from your accounting data and helps you plan hiring against your cash position.
Source: Baremetrics Help Center (ARR: Annual Run Rate, About Forecast+) and Baremetrics Forecasting.
More formulas: SaaS metrics formulas: ARR, NRR, GRR, churn and more.
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Frequently asked questions
What is a burn multiple?
Burn multiple is net burn divided by net new ARR over the same period. It shows how many dollars of cash a startup burns to add one dollar of annual recurring revenue.
What is a good burn multiple?
Lower is better. In the post that introduced the metric, David Sacks calls a 2× burn multiple (burning $2M in a quarter to add $1M of ARR) reasonable for an early-stage startup and 5× terrible.
What is the difference between net burn and gross burn?
Gross burn is the total cash you spend in a period. Net burn is the cash you spend minus the cash you bring in. Burn multiple uses net burn.
Can I calculate burn multiple if my company is cash-flow positive?
Not meaningfully. If net burn is zero or negative you aren't burning cash, so the ratio stops measuring burn efficiency. The same applies when net new ARR is zero or negative.
