Definition
Burn multiple is a growth efficiency metric: how much net cash you burn to generate $1 of net new ARR.
Formula
Burn multiple = net burn / net new ARR
Example
If net burn is $2.5M in a quarter and net new ARR is $1.0M, burn multiple = 2.5.
How to use it
- Use consistent windows (typically quarterly).
- Adjust for annual prepay seasonality if needed.
- Pair with retention and gross margin to judge growth quality.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Burn Multiple" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Burn Multiple Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Burn multiple: definition, formula, and how to use it) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Burn Multiple Calculator: Calculate burn multiple: net burn / net new ARR (a growth efficiency metric).
- Net New ARR Calculator: Calculate net new ARR from new, expansion, contraction, and churned ARR movements.
Guides
- Burn multiple: definition, formula, and how to use it: Burn multiple explained: net burn / net new ARR. Learn how to compute it, interpret it, and avoid common mistakes.
- Net new ARR: definition, formula, and how to calculate it: Net new ARR explained: how to calculate net new ARR from new, expansion, contraction, and churned ARR movements - plus common mistakes.
- Unit economics hub: CAC, LTV, payback, and runway (a practical stack): A practical hub for unit economics: CAC, fully-loaded CAC, LTV, payback, margin impacts, burn multiple, and runway planning.
- ARR waterfall: reconcile starting ARR to ending ARR (net new ARR): A practical ARR waterfall guide: starting ARR + new + expansion - contraction - churn = ending ARR, with examples and pitfalls.