Definition
Cash burn multiple compares net burn to net new ARR to show how efficiently cash turns into growth.
Formula
Burn multiple = net burn / net new ARR
Example
If net burn is $1.5M and net new ARR is $1M, burn multiple is 1.5x.
How to use it
- Lower multiples mean more efficient growth for the same burn.
- Track by quarter to reduce noise from timing.
Common mistakes
- Mixing monthly burn with annual ARR without normalizing.
- Including one-time financing inflows in burn.
Measured as
Burn multiple = net burn / net new ARR
Misused when
- Mixing monthly burn with annual ARR without normalizing.
- Including one-time financing inflows in burn.
Operator takeaway
- Lower multiples mean more efficient growth for the same burn.
- Track by quarter to reduce noise from timing.
- Tie Cash Burn Multiple to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Read Runway and burn: gross vs net burn, working capital, and cash levers if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
- Decide whether Cash Burn Multiple belongs in cash planning, valuation, or debt monitoring so the number is used in the right model.
Where to use this on MetricKit
Guides
- Runway and burn: gross vs net burn, working capital, and cash levers: A practical guide to runway: compute net burn, understand why cash differs from profit, and how working capital and collections change runway.
- 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.