About the Burn Multiple Calculator
The burn multiple measures how efficiently a startup turns cash into growth: how many dollars it burns to add one dollar of net new annual recurring revenue (ARR). Enter net burn for a period plus ARR at the start and end of the same period, and the calculator returns the burn multiple, a rating and your runway at the current burn rate.
Popularised by investor David Sacks, the metric is used by SaaS founders, CFOs and investors because it captures the whole business — sales efficiency, churn, gross margin and overhead — in a single ratio. Lower is better: under 1× is exceptional, while 3× or more usually signals growth that costs too much.
Measure burn and ARR over the same window (a quarter or a year). The metric only makes sense for companies that are burning cash and growing ARR; if net new ARR is zero or negative, the multiple is not meaningful.
With the default inputs, the burn multiple is 1.2 ×. Change any value above to recalculate instantly.
How to use the burn multiple calculator
- 1Enter net cash burn for the period (exclude fundraising proceeds).
- 2Enter ARR at the start and end of the same period.
- 3Choose the period length and enter current cash to see runway.
- 4Read the burn multiple and rating; lower is more capital-efficient.
Formula and method
Net burn is operating cash out minus cash in during the period, excluding money raised from investors. Net new ARR is the change in annual recurring revenue over the same period, so it already nets out churn and contraction. Dividing one by the other shows the cash cost of each dollar of growth.
The rating bands follow the widely cited scale proposed by David Sacks: below 1× amazing, 1–1.5× great, 1.5–2× good, 2–3× suspect, and 3× or more bad. Runway divides today’s cash by average monthly burn over the period and assumes burn stays flat.
- Net burn
- Operating cash outflow minus inflow in the period
- Net new ARR
- New + expansion ARR minus churned and contracted ARR
Worked examples
Series A SaaS, one year
Burning $2.4M while ARR grew from $5M to $7M gives a burn multiple of 2.4 ÷ 2 = 1.2×, rated great. Average burn is $200,000 a month, so $10M of cash lasts about 50 months.
Growth that costs too much
Spending $6.4M to add $2M of net new ARR is a 3.2× burn multiple. At about $533,333 a month, $15M of cash lasts roughly 28 months.
Efficient half-year
Burning $900,000 over six months to add $1.5M of ARR gives 0.6×, an amazing result. Burn averages $150,000 a month, so $4M covers about 26.7 months.
Frequently asked questions
What is a good burn multiple?+
Using the common scale from David Sacks, under 1× is amazing, 1–1.5× great, 1.5–2× good, 2–3× suspect and above 3× bad. Very early startups often run higher while they find product-market fit.
How is burn multiple different from the SaaS magic number?+
The magic number looks only at sales and marketing spend versus new revenue. The burn multiple uses total net burn — including R&D and G&A — and net new ARR after churn, so it measures the efficiency of the whole company.
Should I use quarterly or annual figures?+
Either works if burn and ARR cover the same period. Quarterly figures react faster but are noisier; many investors look at trailing twelve months or average several quarters.
What if my company is profitable?+
If you are not burning cash the burn multiple is zero or undefined, and it stops being a useful metric. Look at the Rule of 40 or free-cash-flow margin instead.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.