Burn Multiple Calculator
Replace the sample values with your own, in one currency and one reporting period. Enter percentages as whole numbers: 2 for 2%. Calculations run in your browser.
Burn multiple = Net Burn / Net New ARR over a time period | Variable | Meaning |
|---|---|
Net Burn | Cash burned net of cash inflows over the period. |
Net New ARR over a time period | Net new annual recurring revenue added during the period (new + expansion − churned − contraction ARR). |
Worked example
- Net Burn
- $2,000,000
- Net New ARR over a time period
- $1,000,000
- → Burn Multiple
- 2
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What Burn Multiple measures
Burn Multiple measures capital efficiency by comparing net burn against net new ARR over a period.
Prepare your inputs
- Choose a period, often a completed quarter, and measure net operating cash burn under a documented cash policy. Exclude fundraising proceeds from operating performance.
- Subtract starting ARR from ending ARR using a consistent recurring revenue definition. Include expansion and losses so the result is net growth.
- Divide the period’s net burn by its net new ARR. Review several periods if collections or major payments make one quarter unusual.
Formula
Burn multiple = Net Burn / Net New ARR over a time period | Variable | Meaning |
|---|---|
Net Burn | Cash burned net of cash inflows over the period. |
Net New ARR over a time period | Net new annual recurring revenue added during the period (new + expansion − churned − contraction ARR). |
Check the sample calculation
Worked example
- Net Burn
- $2,000,000
- Net New ARR over a time period
- $1,000,000
- → Burn Multiple
- 2
Before using the result
- Use the same period for both inputs. Do not divide one month’s burn by a full year’s ARR increase.
- Zero or negative net new ARR makes the usual efficiency interpretation unusable. Report the burn and revenue decline directly.
- A cash-generating company can have negative net burn. Describe that cash generation explicitly instead of treating a negative ratio as an ordinary ranking.
A dash means the result is undefined for the inputs, such as division by zero. Review the assumptions and input errors before interpreting it.
Read the Burn Multiple guide for a business scenario, interpretation, and frequently asked questions.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- David Sacks / Craft Ventures: The Burn Multiple
Original 2020 explanation of net burn divided by net new ARR.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.