Definition
Popularized by David Sacks of Craft Ventures, the burn multiple asks how much cash the company consumes to add a dollar of recurring revenue. It captures sales efficiency, churn and spending discipline in one number.
Formula
Burn multipleBurn multiple = Net burn ÷ Net new ARR (same period)
Example
Demo Co burned $162K in October and added $9.0K of net new MRR, which is $108K of net new ARR. Burn multiple = 162 ÷ 108 = 1.5x.
Benchmarks
Sacks’s scale: under 1x amazing, 1x to 1.5x great, 1.5x to 2x good, 2x to 3x suspect, above 3x bad. Early-stage companies run higher.
Common mistakes
- Using gross new ARR instead of net new ARR.
- Picking a single strong month to report.
Examples use Demo Co, a fictional $3M ARR SaaS company, or a generic company where noted. Benchmarks are common reference points, not targets for every business.