HesapHanem

Burn Multiple Calculator

Enter net burn and net new ARR to find the burn multiple and an efficiency rating.

How it is calculated

You enter net burn and net new ARR, both in dollars and both for the same period, such as a quarter or a year. The tool divides: burn multiple = net burn ÷ net new ARR. Net burn is the cash you lost over the period (cash out minus cash in). Net new ARR is the annual recurring revenue you added, after subtracting churned and contracted ARR. The result is shown as a multiple like 1.20x, with an efficiency label based on fixed bands: under 1x is Great, 1x to under 1.5x is Good, 1.5x to under 2x is Suspect, and 2x or more is Bad. Net new ARR must be above zero, otherwise there is no result, since a period with no net growth has no meaningful multiple.

Worked example

A company burned $2,400,000 in a year and added $2,000,000 of net new ARR in the same year. Burn multiple: 2,400,000 ÷ 2,000,000 = 1.20x. That falls in the 1x to 1.5x band, so the tool rates it Good. In plain terms the company spent $1.20 for every $1.00 of new annual recurring revenue. With the same burn and only $1,000,000 of new ARR, the multiple would double to 2.40x and be rated Bad.

Try this example →

Common mistakes

  • Using gross new ARR instead of net new ARR. Churn and downgrades must be subtracted, otherwise the multiple looks better than it is.
  • Mixing periods, for example a full year of burn with one quarter of new ARR. Both numbers must cover the same time span.
  • Entering total expenses instead of net burn. Net burn is cash lost after revenue; using expenses alone makes the multiple too high.
  • Entering a negative burn when the company made cash. A cash-generating period does not fit this ratio, and the result of 0.00x says nothing useful about efficiency.
  • Comparing the rating across stages without care. The bands are fixed, and the same multiple can look different for a seed company and a late-stage company.

Sources

About this calculator

The burn multiple — popularized by investor David Sacks of Craft Ventures — measures how efficiently a startup converts cash spent into growth: Burn Multiple = Net Cash Burned ÷ Net New ARR added over the same period. It answers a simple question: how many dollars did it cost to add one dollar of new annual recurring revenue?

Lower is better — a burn multiple under 1 is considered excellent, 1 to 1.5 good, and anything above 2 or 3 signals inefficient growth that VCs and founders view as a red flag, especially compared to simpler metrics like growth rate alone, which don’t account for capital efficiency. Startup founders, CFOs, and investors use the burn multiple to judge whether a company’s growth is worth the cash it consumes. Net burn divided by net new ARR gives the burn multiple; the page also grades it, so you can tell how efficiently cash is turning into growth.

Was this helpful?

You can pick up to 3 reactions.

Comments (1)

  • Editorial team

    Net new ARR in a single quarter can be lumpy, with one large contract or one churned account swinging the answer. Entering the trailing twelve months of burn and of net new ARR gives a steadier read than one quarter. The rating bands are fixed cut-offs, so treat Good or Bad as a prompt for questions, not a verdict. Which period do you measure over, and does the label match how you see your company?

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators