Calculate monthly burn multiple: net burn in a month divided by net new ARR in that month. Measures capital efficiency.
Financial Parameters
Enter monthly net burn and net new ARR for the same month to calculate Monthly Burn Multiple
Understanding the Inputs
Key components required for the monthly burn multiple calculation
Monthly Net Burn
Cash consumed in the month: total cash out minus cash in from operations. Exclude financing (e.g. equity, debt) and one-time items.
Opex, capex, working capital changes
From cash flow statement (operating + investing)
Exclude equity, debt, and one-time financing flows
Same month as net new ARR for accurate multiple
Net New ARR This Month
ARR added in the same month: ending ARR minus beginning ARR (new + expansion − churn − contraction). If using MRR change, multiply by 12.
Net new from new customers + expansion − churn − contraction
Same month as net burn for accurate multiple
If using MRR change, multiply by 12 to get net new ARR
Exclude one-time revenue; use recurring only
Formula Used
Monthly Burn Multiple = Monthly Net Burn ÷ Net New ARR (same month)
How many dollars of burn it takes to add one dollar of ARR in that month. Lower is better; under 1.5 is often strong. Pair with CAC payback and LTV:CAC for full efficiency.
Monthly burn multiple is net burn in a single month divided by net new ARR added in that same month. It answers: "How many dollars of cash did we burn to add one dollar of ARR this month?"
A Measure of Capital Efficiency
Lower is better; under 1 means each dollar of burn created more than a dollar of ARR. It is a vital metric for investors, boards, and CFOs to assess how efficiently cash converts to recurring revenue.
Formula and Components
Monthly Burn Multiple = Monthly Net Burn ÷ Net New ARR (same month). Use net burn from cash flow (exclude financing) and net new ARR from recurring revenue change in that month.
The Calculation Identity
Monthly Burn Multiple = Monthly Net Burn ÷ Net New ARR (same month)
Defining Net Burn and Net New ARR
Net burn is cash consumed (operating + investing activities). Net new ARR is the change in ARR over the month—new + expansion − churn − contraction.
Benchmarks and Interpretation
Elite (<1): Each dollar of burn creates more than a dollar of ARR. Strong (1–1.5): Good capital productivity. Moderate (1.5–2.5): Workable; track trend. Weak (>2.5): Reassess spend and growth strategy.
The Ideal Multiple (Under 1.5)
Historically, a burn multiple under 1.5 has been considered strong for SaaS, indicating that capital converts efficiently to recurring revenue.
Burn Multiple vs CAC Payback and LTV:CAC
Burn multiple shows capital-to-ARR efficiency; CAC payback shows time to recover CAC; LTV:CAC shows lifetime return.
Using All Three Together
Target burn multiple under 1.5, payback under 12–18 months, and LTV:CAC ≥ 3:1 for healthy unit economics and scalable growth.
How to Improve Burn Multiple
Reduce burn by cutting low-ROI spend and improving payback (CAC, margin, ARPA).
Accelerate net new ARR through pricing, packaging, and channel efficiency.
Track monthly and use a rolling 3-month average to smooth volatility.
Conclusion
Monthly burn multiple is the core metric for measuring capital-to-ARR efficiency in a given month. It serves as an essential complement to CAC payback and LTV:CAC for capital efficiency.
Target burn multiple under 1.5 where possible, and pair it with payback and LTV:CAC for scalable, sustainable growth.
Frequently Asked Questions
Common questions about monthly burn multiple
What is monthly burn multiple?
Monthly burn multiple is net burn in a single month divided by net new ARR added in that same month. It measures how many dollars of burn it takes to add one dollar of ARR in that month. Lower is better; under 1.5 is often strong.
What is a good monthly burn multiple?
Elite: under 1; Strong: 1–1.5; OK: 1.5–2.5; Risky: over 2.5. Benchmarks vary by stage and market.
Should I use ARR or MRR for net new?
Use net new ARR for the month (change in ARR over the month). If you track MRR change, multiply by 12 to get net new ARR for consistency with standard burn multiple benchmarks.
Do I include capital expenditures in net burn?
Yes. Use net burn from the cash flow statement (operating + investing activities). Exclude financing flows (equity, debt) and one-time items so the multiple reflects operating efficiency.
How often should I track burn multiple?
Track monthly and publish a rolling 3-month average to smooth volatility. Consistency lets you see trendlines and the impact of go-to-market or efficiency changes.
What if net new ARR is negative?
If net new ARR is negative (contraction or churn exceeds new + expansion), burn multiple is not meaningful for that month. Focus on improving retention and growth before interpreting the multiple.
How does monthly burn multiple differ from period burn multiple?
Monthly burn multiple uses one month of burn and one month of net new ARR. Period burn multiple (e.g. quarterly) uses burn and net new ARR over the same period. Same formula; different period length.
Why pair burn multiple with CAC payback?
Burn multiple shows capital-to-ARR efficiency; CAC payback shows time to recover CAC per customer. Both measure capital efficiency—use them together for a full view of spend and growth.
Why do investors care about burn multiple?
Investors use burn multiple to assess how efficiently cash converts to recurring revenue. Elite (<1) or strong (1–1.5) multiples suggest capital-efficient growth; weak (>2.5) multiples raise concerns.
Usage of this Calculator
Practical applications and real-world context
Who Should Use This Calculator?
SaaS Founders & CFOsTo monitor monthly capital efficiency and link burn to ARR growth.
Investors & Board MembersTo assess how efficiently cash converts to recurring revenue.
Finance & Ops TeamsTo report monthly burn multiple and rolling averages.
Startup AnalystsTo compare with CAC payback and LTV:CAC for full efficiency view.
Limitations & Accuracy nuances
Monthly volatility: Single-month burn and ARR can be lumpy. Use a rolling 3-month average to smooth volatility and see trendlines.
Financing excluded: Net burn must exclude equity and debt inflows. Including them understates burn and distorts the multiple.
Negative net new ARR: If net new ARR is negative, burn multiple is not meaningful for that month. Focus on retention and growth.
Real-World Examples
Case A: Elite efficiency
$200K monthly burn, $250K net new ARR → burn multiple 0.8x. Each dollar of burn creates more than a dollar of ARR; capital-efficient growth.
Case B: High burn multiple
$400K monthly burn, $120K net new ARR → burn multiple 3.3x. Weak efficiency; reassess CAC, payback, and spend to improve capital productivity.
Summary
The Monthly Burn Multiple Calculator measures how many dollars of burn it takes to add one dollar of ARR in a month.
Use it with CAC payback and LTV:CAC to assess capital efficiency and scalability of growth.
Target burn multiple under 1.5 where possible and track monthly with a rolling average to smooth volatility.
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Calculate monthly burn multiple: net burn in a month divided by net new ARR in that month. Measures capital efficiency.
How to use Monthly Burn Multiple Calculator
Step-by-step guide to using the Monthly Burn Multiple Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Monthly Burn Multiple Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Monthly Burn Multiple Calculator is designed to be user-friendly and provide instant calculations.
Is the Monthly Burn Multiple Calculator free to use?
Yes, the Monthly Burn Multiple Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Monthly Burn Multiple Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Monthly Burn Multiple Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.