Burn multiple
Also called: Net burn multiple
How many dollars of net cash a company burns to generate one dollar of net new ARR.
Burn multiple = Net cash burned in period ÷ Net new ARR in period
Where the magic number isolates sales and marketing efficiency, the burn multiple takes in the whole company — engineering, G&A, everything. It answers the bluntest question an investor has: what does a dollar of growth cost you in cash?
Common bands:
| Burn multiple | Read as |
|---|---|
| Under 1x | Exceptional |
| 1–1.5x | Great |
| 1.5–2x | Good |
| 2–3x | Acceptable, watch it |
| Over 3x | Problematic |
Lower is better, and a company that is cash-flow positive while growing has an undefined or negative multiple, which is the ideal outcome.
Why it is hard to game
Most efficiency metrics can be flattered by moving costs between categories or picking a favourable margin definition. The burn multiple uses net cash burn — the actual change in the bank balance excluding financing — so reclassifying spend does not help. Whatever you spent, you spent.
That robustness is the reason it became a standard diligence metric after 2022. It also means the number is sensitive to billing terms: collecting annually in advance rather than monthly reduces cash burn materially without changing anything about the P&L. That is not gaming the metric, it is working capital management, and it is one of the highest-leverage things a subscription business controls.
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