SaaS Burn Multiple Calculator

Burn Multiple Definition by David Sacks

Burn Multiple = Net Burn / Net New ARR. Sacks introduced the metric in his Substack post 'Burn Multiple' (2020). It's the inverse of cash-on-cash multiple: tells you 'for every $1 of new ARR, how much cash did you burn?' Top SaaS companies achieve <1× (elite); <2× very good; 2-3× OK; >3× indicates inefficiency or product-market-fit issues. Source: davidsacks.substack.com.

Net New ARR vs Net Burn — Definitions

Net New ARR = New customer ARR + Expansion ARR − Churn ARR − Contraction ARR. Net Burn = Cash out − Cash in (operating only; exclude financing). Some founders include CapEx in burn; standard practice excludes. Quarter measurement is most common; annual works but smooths over volatility.

Improving Burn Multiple Strategies

(1) Reduce burn: layoffs (often last resort), pause hiring, cut tooling, renegotiate vendors, end unprofitable customer success programs. (2) Grow ARR: focus on expansion (NRR > 110% pushes burn multiple down dramatically). (3) Reduce churn (improve onboarding, customer success). (4) Increase ACV via packaging or pricing. Best Slack-era SaaS achieved 0.5-1× burn multiple via expansion-led growth.

Benchmarks Across SaaS Stages

Seed: Burn multiple often >3× (early product-market fit). Series A/B: aim for <2× as scale validates. Series C+ and public: <1× becomes expectation. Bessemer Cloud Index publishes public-SaaS burn multiple medians ~1-2× across recent quarters. VC-backed private cohort median 2-3× per OpenView SaaS Benchmark.