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SaaS Metrics Library
Burn Multiple: Calculation, Benchmarks & Improvement Guide
The burn multiple shows how much cash a company burns to add each dollar of net new annual recurring revenue. It is a measure of how efficiently the whole business, not only sales and marketing, turns spending into growth.
BURN MULTIPLE
No median with a stated sample is published. Pooled averages by ARR band:
Scale Venture Partners, July 2022 · several hundred SaaS companies
This article will provide
- Calculation
- Benchmarks
- Improvement
The burn multiple measures how much net cash a company burns for every dollar of net new annual recurring revenue (ARR) it adds over the same period.
It was introduced by David Sacks of Craft Ventures in April 2020. He described it as an inverted version of Bessemer Venture Partners' efficiency score, so that a lower number is better: the less cash it takes to add a dollar of ARR, the more efficient the growth. In the same essay he contrasted it with the hype ratio, which divides all capital raised by ARR.
Unlike the SaaS magic number or sales efficiency, which compare new revenue with sales and marketing spend only, the burn multiple uses net burn. That captures every cost in the business: product, engineering, general and administrative, and go-to-market. Sacks called it a "catch-all metric" for this reason.
Also known as: burn multiple ratio, cash burn multiple, net burn to net new ARR.
How is burn multiple calculated?
The burn multiple is net burn for a period divided by net new ARR for the same period.
Burn multiple = Net burn / Net new ARR
The inputs:
- Net burn: cash spent minus cash received from operations over the period. Financing inflows, such as equity raised or new loans, are excluded. How to measure it is covered in cash burn and cash runway.
- Net new ARR: ARR at the end of the period minus ARR at the start. It already nets off churn and contraction against new and expansion ARR.
Worked example. Over a year a company burns $1,500,000 of cash, net of customer receipts. Its ARR rises from $4,000,000 to $5,000,000, so net new ARR is $1,000,000.
Burn multiple = $1,500,000 / $1,000,000 = 1.5x
The business burned $1.50 of cash for each dollar of ARR it added.
The burn multiple only applies to a company that is burning cash. A company that generates cash while growing does not have a meaningful burn multiple, because the result would be negative.
Try it with your numbers
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Net new ARR: $1,000,000
1.50xburn multiple
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Download the 2026 SaaS Benchmark Report We’ve emailed you a copy as well.How is burn multiple used by SaaS companies?
Sacks designed the metric for a specific question: is growth being bought at a price the business can sustain? A company can grow quickly by spending heavily, and growth figures alone will not show it. The burn multiple ties the growth to the cash it consumed.
Finance teams and boards use it in four ways:
- Fundraising. Investors use it to compare companies of different sizes and growth rates on one efficiency measure.
- Setting the burn budget. If the plan adds $3 million of net new ARR and the board accepts a burn multiple of 1.5x, the implied net burn is $4.5 million. The metric turns a growth target into a cash budget.
- Spotting a problem early. A rising multiple means each dollar of ARR is costing more cash. Sacks noted that the metric reflects problems anywhere in the business, including churn, because churn reduces net new ARR.
- Runway planning. Combined with the cash balance, the burn multiple shows how much ARR the company can expect to add before it needs to raise again.
Because it uses net new ARR, the burn multiple is volatile in small companies and in quarters with large one-off deals. Most finance teams calculate it on a trailing twelve months or a full quarter, and look at the trend.
What is a good result?
Lower is better. The original thresholds come from David Sacks's April 2020 essay, where he set out rules of thumb for venture-stage startups:
| Burn multiple | Efficiency |
|---|---|
| Under 1x | Amazing |
| 1x to 1.5x | Great |
| 1.5x to 2x | Good |
| 2x to 3x | Suspect |
| Over 3x | Bad |
In the same essay he described about 2x as "reasonable for an early-stage startup". These are one investor's guidelines, not an observed distribution of companies.
Stage matters. Early-stage companies are still building the product and the team, and spend ahead of revenue, so a higher multiple is normal at very low ARR. The same multiple in a business with $20 million of ARR says something different. Compare against companies at a similar size and growth rate where you can, and read the multiple alongside growth: a low multiple with very low growth can simply mean the company has stopped investing.
What are the burn multiple benchmarks?
No survey publishes a burn multiple median with a stated sample size and data year. The most cited reference points are below. Read them as context, not as a distribution of companies.
| Reference point | Burn multiple | Source |
|---|---|---|
| Pooled average, companies with $0–$1M ARR | 3.4x | Scale Venture Partners, July 11, 2022 |
| Pooled average, companies with $25–$50M ARR | 1.4x | Scale Venture Partners, July 11, 2022 |
| "Reasonable for an early-stage startup" | About 2x | David Sacks, April 23, 2020 |
The pattern matters more than any single figure: the multiple falls as companies grow. A 3x burn multiple is common at $1 million of ARR and a warning sign at $30 million. Scale Venture Partners took its figures from a dataset of "several hundred SaaS companies, private and public" and does not state the exact sample or the data year, so treat them as indicative.
The 2026 Aleph × Benchmarkit SaaS & AI Performance Benchmarks, which this library uses for most 2026 figures, does not report a burn multiple. For sales and marketing efficiency alone, see the sales efficiency benchmarks.
Sources: Scale Venture Partners, Edi Danalache, "Benchmarking startup growth and burn", July 11, 2022; David Sacks, "The Burn Multiple", April 23, 2020. Both checked October 26, 2026.
Measure efficient growth
Know what each dollar of new ARR costs.
ScaleXP calculates ARR and 30+ other SaaS metrics from your accounting data, your CRM data or both, so net new ARR is measured on one definition every period.
Metric definitions can be edited to match the way your board and investors read ARR.
Automate Your SaaS MetricsExample burn multiple view
- Accounting: Xero, QuickBooks, Zoho Books
- CRM (with Xero or QuickBooks Online): HubSpot, Salesforce, Pipedrive
Net new ARR
$1,000,000
ARR rose from $4.0M to $5.0M over the year, after new, expansion, contraction and churned ARR.
Illustrative example figures, not your live data.
What to do with your burn multiple number
The burn multiple has two inputs, and each points to a different set of actions.
- Check the denominator before cutting cost. Net new ARR is new and expansion ARR minus churn and contraction. A multiple that rose because churn doubled is a retention problem; cutting spend will not fix it. See customer churn.
- Split burn by function. Sales and marketing efficiency is covered by the magic number and CAC payback. If those look healthy but the burn multiple does not, the excess spend is in product, engineering or overheads.
- Set the multiple in the budget. Agreeing a target multiple with the board turns a growth plan into a cash plan and makes the trade-off between faster growth and longer runway explicit.
- Keep the definitions fixed. Measure net burn from operating cash flow, excluding financing, and use the same ARR definition every period. A change in either moves the multiple without anything changing in the business.
How ScaleXP tracks the inputs to the burn multiple
ScaleXP calculates 30+ SaaS metrics, including ARR, from your accounting data, your CRM data or both. It connects Xero and QuickBooks Online with HubSpot, Salesforce, Pipedrive and Stripe. For Zoho Books, ScaleXP provides MRR and ARR reporting.
Metric definitions can be edited, so ARR is measured the same way every period. That consistency is what keeps a burn multiple comparable from one quarter to the next: if the ARR definition moves, the multiple moves with it even when nothing has changed in the business.
Frequently asked questions
What is the difference between the burn multiple and the SaaS magic number?
The magic number compares new revenue with sales and marketing spend only, so it measures go-to-market efficiency. The burn multiple compares net new ARR with net burn, which includes every cost in the business, from engineering to overheads, and nets off customer receipts. A company can have a healthy magic number and a poor burn multiple if spending outside sales and marketing is high. The burn multiple is also inverted, so lower is better, while a higher magic number is better.
Should net burn include financing such as equity or debt?
No. Net burn measures the cash the business consumes from its operations and investment, so new equity, new loans and loan repayments are excluded. Including a funding round would make a company look cash generative in the quarter it raised money. Interest paid is usually included, because it is an ongoing cost of running the business. State the definition you use when you report the multiple, so that investors can compare it with other companies.
What does a negative burn multiple mean?
A negative result means one of the inputs is negative. If the company generated cash while ARR grew, there is no burn to measure, and the business is self-funding its growth, which is a stronger position than any burn multiple. If ARR fell while the company burned cash, the multiple has no useful meaning. In both cases, report the underlying figures, cash generated or burned and the change in ARR, instead of the ratio.
How often should the burn multiple be calculated?
Quarterly or on a trailing twelve-month basis is most common. Net new ARR can swing sharply in a single month on one large contract or cancellation, and cash payments such as annual software licenses or bonuses distort monthly burn. Calculating over a quarter or a year smooths both. Many finance teams report the trailing twelve-month figure to the board and review the quarterly figure internally to catch changes earlier.
Can ScaleXP track the ARR side of the burn multiple?
Yes. ScaleXP calculates 30+ SaaS metrics, including ARR, from Xero or QuickBooks Online data, from HubSpot, Salesforce or Pipedrive data, or from both. For Zoho Books, ScaleXP provides MRR and ARR reporting. Customers choose the data source for each metric, and metric definitions can be edited, so net new ARR is measured on one agreed definition every period. Net burn is a cash figure that finance takes from the cash flow statement for the same period.
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