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Burn multiple calculator

The burn multiple is how much cash you burn to add one euro of net new ARR. Enter net burn and net new ARR for the same period, and optionally your cash balance. You get the multiple, how it reads against the bands David Sacks published, and your runway at the current burn rate.

Burn multiple calculator

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Cash out minus cash in from operations over the period. Not gross spend.
New plus expansion ARR minus churned and contracted ARR.
12 for a year, 3 for a quarter.
Used only to work out runway.

How it is calculated

Burn multiple = net burn ÷ net new ARR (same period for both)

Net new ARR is new customer ARR plus expansion, minus churn and contraction. It is the net figure on purpose: growth that is cancelled by churn should not make the multiple look better. David Sacks introduced the metric at Craft Ventures as a way to compare capital efficiency across companies of different sizes.

Worked example

Over twelve months a company burned 600,000 net and added 400,000 of net new ARR. The burn multiple is 600,000 ÷ 400,000 = 1.5×.

With 900,000 in the bank and a burn of 50,000 a month, runway is 18 months. Use the same window for burn and ARR. A quarter works too, but short windows are noisier.

How to read your result

These bands are David Sacks’ (Craft Ventures, “The Burn Multiple”, 2020). Below about €1M ARR, one large deal changes the figure, so read it over a trailing twelve months.

RangeReadingWhat it means
Under 1×AmazingMore than a euro of new ARR per euro burned.
1× to 1.5×GreatEfficient growth.
1.5× to 2×GoodWatch the direction of travel.
2× to 3×SuspectFind the cause: CAC, churn or hiring ahead of revenue.
Over 3×BadFix efficiency before raising.

How to improve it

Grow net new ARR before cutting burn

If the product has traction, the fastest way to lower the multiple is more net new ARR from the same spend. Cutting the team first can lower both sides at once.

Fix churn

Net new ARR is net of churn. A company at 2.5× with high churn often sits at 1.8× once the leak is fixed, with no extra spend.

Hire behind revenue, not ahead of it

A team sized for next year’s revenue makes this year’s multiple look poor. Delay hires until the pipeline can carry them.

Track it quarterly on a rolling basis

A single quarter is noisy. A four-quarter rolling figure shows the real direction and is harder for one deal to distort.

Common mistakes

Using gross burn

Net burn means cash out minus cash in. Using gross spend overstates the multiple for a company with healthy revenue.

Using gross new ARR

Net new ARR subtracts churn. Using only new bookings hides a leaking base.

Mixing periods

Burn for a year against ARR for a quarter gives a number that means nothing. Use the same window for both.

FAQ

What is a good burn multiple?
David Sacks’ bands are: under 1× amazing, 1× to 1.5× great, 1.5× to 2× good, 2× to 3× suspect and over 3× bad. Early-stage companies often run above these while they find a repeatable motion, so the trend matters more than a single reading.
How is the burn multiple different from CAC payback?
CAC payback looks only at the cost of winning customers. The burn multiple counts every euro the company burns, including product and admin, against net new recurring revenue. It is the broader measure of capital efficiency.
Does burn multiple apply to bootstrapped companies?
Yes, though the bands were written for venture-backed companies. If you are profitable, net burn is negative and the multiple is not meaningful. The metric matters most when growth is funded by outside capital.
Can the burn multiple be negative?
If net burn is zero or negative, the company is cash flow positive and the metric loses its meaning. If net new ARR is zero or negative, the multiple is undefined and the calculator says so.

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Written by Madalena Rugeroni, founder of Mazo · Updated 10 November 2026. Benchmarks are credited to whoever published them; where a band is Mazo's own it is labelled as a working threshold. Results are a starting point, not financial advice. Mazo is not affiliated with or endorsed by the sources below.

  1. David Sacks (Craft Ventures), “The Burn Multiple”, 2020