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★ How much cash do we burn for each dollar of new ARR?

Burn Multiple Calculator

Calculate your burn multiple: net burn divided by net new ARR. See where you land on David Sacks’ scale from amazing to bad.

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$

Cash out minus cash in, over the period.

$

ARR added in the same period, after churn.

Your Burn multiple

1.50x

Good

  • You burned 1.50 for every 1 of net new ARR.

burn multiple = net burn ÷ net new ARR (same period)

Burn multiple: 1.50x.

Burning more than you add? Engineering is often the biggest line. One senior builder can replace a team you can't afford yet.

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01

How it works

burn multiple = net burn ÷ net new ARR (same period)

Net burn is how much cash you lost over the period. Net new ARR is how much annual recurring revenue you added, after churn and downgrades. Dividing one by the other measures how efficiently burn turns into growth.

Unlike LTV:CAC, it counts all spending, not just sales and marketing. Engineering, G&A and everything else is in the numerator.

02

Worked example

A company burned $1.2M over a year and added $800,000 of net new ARR.

Burn multiple worked example
InputValue
Net burn$1,200,000
Net new ARR$800,000
Burn multiple1.50x

That lands in the good band. Change any input above to run your own numbers.

03

Benchmarks

David Sacks of Craft Ventures introduced the burn multiple and grades it: under 1x amazing, 1–1.5x great, 1.5–2x good, 2–3x suspect, over 3x bad. Very early companies, still searching for repeatable growth, typically sit higher.

Burn multiple benchmark bands
Burn multipleReading
under 1xAmazing
1x to 1.5xGreat
1.5x to 2xGood
2x to 3xSuspect
3x and aboveBad

Source: David Sacks, The Burn Multiple (Craft Ventures).

04

How to improve it

  • Cut spend that does not touch growth or retention before cutting growth spend.
  • Reduce churn: lost ARR reduces net new ARR one for one.
  • Raise prices for new customers; it adds ARR without adding burn.
  • Keep the team small and senior until growth is repeatable.
05

Questions founders actually ask

What is a good burn multiple?
On David Sacks’ scale, under 1x is amazing, 1–1.5x great, 1.5–2x good, 2–3x suspect and over 3x bad. Earlier companies tend to run higher.
What period should I measure over?
A quarter or a year. A single month is too noisy, because both burn and new ARR are lumpy.
What if net new ARR is negative?
The multiple becomes meaningless, and the situation is worse than any band: you are burning cash and shrinking.
How is burn multiple different from the magic number?
The magic number looks only at sales and marketing efficiency. The burn multiple includes every dollar of burn, so it reflects the efficiency of the whole company.
06

Related metrics

All 12 SaaS metric calculators

07

More from the workbench

03 · Money & fundraisingRunway & Burn CalculatorMonths of cash left, the date it hits zero, and whether you are default alive.01 · Plan & scopeMVP Cost EstimatorPick features and who builds it. Get an hour-by-hour estimate, not an agency teaser.02 · AI & LLMsLLM API Cost CalculatorYour monthly bill across Claude, GPT, Gemini and open models, side by side.

Fine print

Tools: on the house.
Engineer: by the hour.

Moving them is the expensive part, and the part I'm good at: activation flows, upsell moments and the product work behind better numbers.

I'm Himanshu, an AI and full-stack engineer. I build MVPs, AI agents and the growth plumbing around them for early-stage startups.

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