Know the Figures

Burn Multiple Calculator

How much cash you burn to add each unit of net new ARR, and the band that puts you in.

Replaces: Board-deck benchmarking from investors and consultants

How to use it

Enter the net cash burned over a period and ARR at its start and end. The calculator divides the burn by the ARR you added, places the result in the commonly cited bands, and shows how the multiple moves if growth had been higher or lower.

Where the number comes from

  • Net new ARR is ending ARR minus starting ARR, so churn and contraction are already netted off.
  • The burn multiple is net burn divided by net new ARR: the cash consumed for each unit of recurring revenue added.
  • The bands are the ones popularised by David Sacks: under 1× amazing, 1–1.5× great, 1.5–2× good, 2–3× suspect, over 3× bad. They are a widely quoted convention, not a standard.
  • Monthly burn is the period’s net burn divided by its length; runway is cash on hand divided by that monthly figure.
  • The table rescales net new ARR from half to one and a half times what you entered, at the same burn, to show how sensitive the band is to growth.

What goes wrong

The part most calculators leave out.

  • ARR means different things in different companies. Counting signed but not yet live contracts, or annualising a usage spike, inflates net new ARR and flatters the multiple.
  • One-off cash items distort burn: an annual prepayment collected in the period, a large tax refund or a deferred supplier bill all make burn look lower than the run rate.
  • Burn and ARR must cover the same months. Twelve months of burn against nine months of ARR growth overstates the multiple by a third.
  • Money raised must stay out of net burn. Including a funding round as cash in makes burn vanish.
  • A low multiple from a small base, or in a single strong quarter, says less than the same figure sustained over a year at scale.
  • Runway assumes burn stays at the period’s average. Hiring plans or a falling collection rate change it quickly.

A great multiple, one band from amazing

A company burns 1.8m over 12 months while ARR grows from 4m to 5.5m. Net new ARR is 1.5m, so the burn multiple is 1.2×: every unit of new ARR cost 1.2 of cash. That falls in the band usually called great. To get under 1× at the same burn it would need 1.8m of net new ARR, another 300,000. With 6m in the bank and an average burn of 150,000 a month, runway is 40 months.

Questions

What is a good burn multiple?
The commonly cited bands call under 1× amazing, 1–1.5× great, 1.5–2× good, 2–3× suspect and over 3× bad. Early-stage companies often run higher while they find their market; what investors expect varies with stage and funding conditions.
What if ARR went down?
Then there is no burn multiple. Dividing burn by a negative or zero number does not produce a meaningful figure, so the calculator shows a dash and says plainly that the cash bought no net growth.
Should net burn include money raised?
No. Net burn is operating cash out minus operating cash in. A funding round or a loan drawn is financing, and counting it as cash in makes the burn disappear.
Can I use a quarter instead of a year?
Yes, as long as the burn and the ARR change cover the same quarter. The multiple is a ratio, so the period cancels. A single quarter is noisier, so compare it with the trailing year.
Does anything I type get sent anywhere?
No. The whole calculation runs in your browser. Nothing is sent to us or logged, and there is no account to create. Your browser keeps the figures with this tab’s history so that Back and Reload bring them back, and Reset clears them.

Last updated .

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