What is Burn Multiple?

Burn Multiple is a startup metric that measures how efficiently a company is converting cash into revenue. It is calculated by dividing net cash burned by net new ARR (Annual Recurring Revenue) over a specific period. This metric is particularly important for SaaS companies and investor evaluations during periods of growth or fundraising.

Formula:

Burn Multiple = Net Cash Burn / Net New ARR

  • A lower burn multiple (closer to 1 or below) indicates high efficiency — the company is generating more revenue for every dollar spent.

  • A higher burn multiple (above 2–3) may indicate inefficient growth or excessive spending.

Example:

If a company burns $400,000 in a quarter but adds $200,000 in new ARR, its burn multiple is 2.0 — meaning it spent $2 to gain $1 in recurring revenue.

Why It Matters:

  • Signals financial discipline to investors

  • Helps startups evaluate the cost of growth

  • Useful for deciding when to accelerate or decelerate spending

  • Often used in conjunction with CAC and LTV to assess overall SaaS health