Burn Multiple Calculator
The burn multiple, popularized by investor David Sacks, measures how much cash a startup burns to generate each dollar of net new annual recurring revenue. A lower burn multiple means more efficient growth. Enter your net burn and net new ARR over the same period to see your burn multiple and how it maps to common efficiency bands.
Burn multiple formula
Burn multiple = net cash burn / net new ARR
Efficiency score = 1 / burn multiple
Burn per $100k ARR = burn multiple * 100,000
Both figures must cover the same period (usually a quarter or year). Net burn is cash out minus cash in. Net new ARR is ARR at end of period minus ARR at start.
Worked example
A startup burns 1,000,000 dollars net in a quarter and adds 500,000 dollars of net new ARR. Burn multiple = 1,000,000 / 500,000 = 2.00. That means it spends 2 dollars of cash for every 1 dollar of new annual recurring revenue. Burn per 100,000 dollars of new ARR is 200,000 dollars.
Reading the burn multiple
- Commonly cited efficiency bands: under 1 is excellent, 1 to 1.5 is great, 1.5 to 2 is good, 2 to 3 is suspect, and above 3 is generally considered poor.
- A negative net new ARR (shrinking) makes the multiple undefined or negative; the business is burning while contracting.
- The metric captures the all-in efficiency of the whole company, not just sales and marketing.
- Compare the burn multiple across periods to see whether efficiency is improving as you scale.
Burn Multiple Calculator: frequently asked questions
What is a good burn multiple?
As a widely cited guideline, a burn multiple under 1 is excellent, 1 to 1.5 is great, 1.5 to 2 is good, 2 to 3 is suspect, and above 3 is poor. Lower is always better because it means you burn less cash per dollar of new recurring revenue.
How is burn multiple different from the magic number?
The SaaS magic number measures sales and marketing efficiency specifically (new ARR per dollar of sales and marketing spend). The burn multiple measures total company efficiency using all net cash burn, so it captures product, engineering, and overhead as well.
What period should I use?
Use the same period for both inputs, typically a quarter or a year. Net burn and net new ARR must be measured over the identical window for the ratio to be meaningful.
What if my net new ARR is zero or negative?
If net new ARR is zero, the burn multiple is undefined (division by zero). If it is negative, you are burning cash while recurring revenue shrinks, which is the worst case; this calculator flags non-positive net new ARR.
Sources and methodology
- The burn multiple is defined arithmetically as net burn divided by net new ARR; efficiency bands are widely cited investor guidelines, not regulatory figures.
- U.S. Small Business Administration: Manage your finances.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.