The burn multiple is net burn divided by net new ARR, and it tells you how many dollars you spend to add one dollar of recurring revenue. If you burned $500,000 in a quarter and added $250,000 of net new ARR, your burn multiple is 2.0. Enter your own numbers below to see yours.
Figures checked by Muhammad Ahmad against David Sacks: The Burn Multiple (Craft Ventures), Bessemer Venture Partners: SaaS benchmarks and SaaStr: Burn multiple benchmarks by stage. Prices and rules change, so confirm with the official source before relying on them. How we check the math
How it works
Enter the net new ARR for the period: new ARR added, minus churned and downgraded ARR, over the same window. Do not use gross new ARR, which hides churn.
Enter net cash burn for that same period: cash out minus cash in, excluding one-off financing (fund-raising rounds, debt). Use operating cash flow if you have it, otherwise cash balance change minus investing activity.
The calculator divides burn by net new ARR. A multiple of 1 means you burn $1 to add $1 of ARR; 2 means $2 to add $1; below 1 means you added more ARR than cash you spent.
Use the same period length (month, quarter, year) on both inputs. Period length does not change the ratio but the number has to be apples to apples.
A worked example
A SaaS startup adds $1.2M in net new ARR during Q3 (so $1.5M gross added minus $300K churned). Over the same quarter it burned $2M of cash. Burn multiple = 2 / 1.2 = 1.67. That lands in the "good — healthy burn" band: not top-tier, but acceptable for most early-stage categories.
More examples
Same company tightens spend to $1.5M of burn with the same $1.2M of net new ARR. Burn multiple drops to 1.25 — now firmly in the "great" band and more fundable.
A later-stage company at $20M ARR adds $800K of net new ARR in a quarter and burns $3.2M. Burn multiple = 4.0: a red flag that gross retention or expansion has stalled while costs stayed fixed.
Common mistakes
- Using gross new ARR instead of net new ARR. Hides churn and makes the multiple look better than it is.
- Netting fund-raising cash into the burn figure. Cash raised is not operating burn; it just extends the runway.
- Comparing a seed-stage burn multiple to a Series C benchmark. Early stages routinely burn 2-3x per dollar of ARR added and that's expected.
- Reading one quarter in isolation. Burn multiple is noisy; use a trailing twelve-month figure as the real signal.
Questions people ask
What is a good burn multiple?
David Sacks's original bands: under 1 is amazing, 1 to 1.5 great, 1.5 to 2 good, 2 to 3 suspect, over 3 bad. Early-stage companies get more leeway (2-3 is common at seed) and later-stage companies are judged more strictly (above 1.5 at Series C+ gets questions).
What is the burn multiple formula?
Burn multiple = net cash burn ÷ net new ARR, over the same time period. Both inputs cover the same window; the period length does not change the ratio.
How is burn multiple different from the SaaS magic number?
Magic number only measures the efficiency of sales and marketing spend (net new ARR ÷ S&M cost). Burn multiple measures the efficiency of all cash burn, including engineering, G&A and overhead. Burn multiple is harsher and more holistic; magic number is useful for isolating sales efficiency.
Can burn multiple be negative?
Yes, when a company is cash-flow positive (burn is negative). A negative burn multiple is excellent — you are adding ARR AND generating cash. Most profitable SaaS companies don't quote the ratio once they cross into positive cash flow.
Does the burn multiple apply to non-SaaS businesses?
The ratio generalises as 'dollars burned per dollar of annualised recurring revenue added', so any subscription business can use it. Services businesses typically substitute gross profit added for ARR added.