Burn Multiple
Burn Multiple measures how much cash a company burns to generate each dollar of net new ARR. It is calculated by dividing net cash burned by net new ARR in the same period. A burn multiple of 1.5x means you spend $1.50 to generate $1 of new ARR. Lower is better.
Why Burn Multiple Matters for SaaS Companies
Burn multiple replaced 'growth at all costs' as the efficiency metric investors care about most. It directly answers: how efficiently are you converting cash into growth? For Seed to Series B companies managing runway, burn multiple determines how long you can sustain current growth and how urgently you need to raise.
Formula
Burn Multiple = Net Cash Burned / Net New ARR (same period)
Benchmark
Excellent: below 1x. Good: 1-1.5x. Acceptable: 1.5-2x. Concerning: 2-3x. Red flag: above 3x.
Tools for Measurement
An Operator's Take
Burn multiple is the metric that humbles founders who think they are growing fast. I worked with a company growing 100% YoY — impressive until you see they were burning $3 for every $1 of new ARR (3x burn multiple). They had 14 months of runway and no path to efficiency. We restructured their growth model: fixed involuntary churn (recovering revenue without acquisition cost), optimized pricing (higher ARPA from same customers), and cut underperforming marketing channels. Burn multiple dropped from 3x to 1.2x. Same growth rate, dramatically less cash burn.
Common Mistakes
What I see go wrong at Seed to Series B companies.
Using gross new ARR instead of net new ARR. If you added $2M in new ARR but lost $1M to churn, net new is $1M. Burn multiple should use the net number.
Ignoring burn multiple at the early stage because 'we are investing in growth.' Even at Seed, knowing your burn multiple helps you plan runway.
Only looking at burn multiple quarterly. Monthly tracking reveals efficiency trends faster.
What to Do This Week
Concrete steps you can take right now.
Calculate your current burn multiple. If above 2x, identify whether the problem is high burn or low net new ARR.
Model your runway at current burn multiple. How many months until you need to raise or reach breakeven?
Identify the fastest path to improving burn multiple: is it reducing expenses, increasing new ARR, or reducing churn?
Related Resources
Try These Tools
Further Reading
Frequently Asked Questions
What is a good burn multiple?
Below 1x is excellent — you are generating more new ARR than you are burning cash. Between 1-1.5x is good and typical for efficient growth-stage companies. Above 2x warrants attention, and above 3x is a red flag that growth is too expensive relative to the revenue it generates.
How do you reduce burn multiple?
Two paths: increase net new ARR (better retention reduces churn, which increases net new) or reduce cash burn (cut underperforming channels, automate manual processes, optimize team structure). The fastest improvement usually comes from reducing churn — it increases net new ARR without additional acquisition spend.
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