What is Burn Multiple?
Definition
Burn Multiple measures how much capital you burn to generate $1 of net new ARR. Lower is better - it shows capital efficiency.
Formula
Burn Multiple = Net Burn / Net New ARR
Example:
Net Burn: $500,000 | Net New ARR: $250,000
Burn Multiple = 2.0x (spent $2 to gain $1 ARR)
Benchmarks
Below 1.5x - Excellent efficiency
1.5x - 2x - Good efficiency
2x - 3x - Acceptable
Above 3x - Poor efficiency