Burn multiple calculator
A metric SaaS investors use: how much cash the company burns to add each 1 of annual recurring revenue.
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How to use it
- Enter net burn in the period and net new arr in the same period.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Burn multiple = net burn in the period ÷ net new ARR in the same period.
Example
Inputs: Net burn in the period = 1,500,000, Net new ARR in the same period = 1,000,000. Result: Burn multiple: 1.5 x; Rating on the David Sacks scale: Good (1.5 to 2); Cash burned per 1 of new ARR: 1.5.
Limits and caveats
- The rating is a rule of thumb published by David Sacks of Craft Ventures, not a formal standard, and is looser for very early companies.
- Use the same period for both figures, ideally a quarter or a full year.
Questions about this tool
What does a burn multiple of 1.5 mean?
The company burned a net 1.5 for every 1 it added to annual recurring revenue.
What is net new ARR?
ARR at the end of the period minus ARR at the start, after churn and expansion.
Does it work outside subscription businesses?
It was designed for SaaS and subscriptions; you can approximate it with annual revenue growth elsewhere, with care.