ARR Burn Multiple

Compute cash burned per unit of net new ARR over a consistently measured period.

Description

Burn multiple relates net cash consumed to net new annual recurring revenue.

Burn multiple relates net cash consumed to net new annual recurring revenue. The numerator and growth amount should refer to the same measured period.

Compute cash burned per unit of net new ARR over a consistently measured period.

When to use ARR Burn Multiple

Use this for the following task: Compute cash burned per unit of net new ARR over a consistently measured period.

Prepare the scenario values in one currency and consistent time periods. Use fractions for fraction fields and percentage points for percent fields.

How to use ARR Burn Multiple and understand its results

Prepare the scenario values in one currency and consistent time periods. Use fractions for fraction fields and percentage points for percent fields.
Enter netCashBurn, netNewArr using the field table, then run the tool.
Read burnMultiple. Interpret flags, units, ordering and placeholder values using the rules below.
Review any reported issue or failed check, correct the supplied values when appropriate, and verify the result in its intended context.

Input field	Meaning	Value type and bounds	Requirement
netCashBurn	Net cash burn	number	Required
netNewArr	Net new arr	number	Required

Use nonnegative cash burn and strictly positive net new ARR in consistent currency units. Return their ratio.^[1]

burnMultiple=netCashBurn/netNewARR

This summarizes the declared operation. Units, indexing, inclusivity and exceptional cases are explained in the surrounding text.

Output field	Meaning	Value type
burnMultiple	Burn multiple	number

json

{
  "input": {
    "netCashBurn": 200000,
    "netNewArr": 100000
  },
  "output": {
    "burnMultiple": 2
  }
}

Limitations and assumptions

Zero or negative ARR growth is outside the denominator model. This does not measure cash runway or audit operating efficiency.

These outputs describe the supplied scenario; accounting definitions, capitalization terms and time periods must match the intended use. Malformed requests produce input errors. A successfully evaluated request can still contain false flags, empty result lists or a result outside the supplied threshold; those outcomes have the meanings stated above.

Alternative or Complementary methods

Choose SAAS Magic Number for this operation: Calculate annualized quarterly revenue growth per prior-quarter sales and marketing spend. For a complementary task, use Growth Margin Rule for this operation: Screen combined growth and profit margin against a caller-selected rule-of-40 target.

The implementation reference documents the exact calculation, supported input shapes and returned fields.

References

ARR Burn Multiple — tool.io

Similar or alternative tools

SAAS Magic Number
Calculate annualized quarterly revenue growth per prior-quarter sales and marketing spend.
Growth Margin Rule
Screen combined growth and profit margin against a caller-selected rule-of-40 target.