Metric guide · Growth efficiency
Burn multiple
Short answer
Burn multiple is net burn divided by net new ARR in the same period. It shows how many dollars a company burns to add one dollar of recurring revenue. A burn multiple of 1 means each new dollar of ARR cost a dollar of burn. Lower is better, and it only means something while both parts are above zero.
The formula
Burn multiple = net burn ÷ net new ARR, for the same month
Unit: Ratio. Better when it goes down.
How to calculate it
- Take net burn for a closed month.
- Take net new ARR for the same month: new and expansion ARR minus contraction and churned ARR.
- Divide net burn by net new ARR.
- Read a three-month average as well, because one large deal or an annual bill moves a single month a lot.
Mistakes that distort it
When ARR shrinks or stays flat, the ratio is negative or infinite. Report that month as not meaningful, never as a very good number.
Gross burn ignores revenue and overstates the multiple. Use net burn.
Burn from the books for August and ARR as of today answer different questions. Use the same closed month for both.
Where Sondola reads it from
Sondola divides Net burn, books by net new ARR for each closed month, and uses Net burn, bank when there are no books. It shows nothing for a month when either part is zero or below. Each reading keeps where it came from, the period and the date it was recorded, and you can download all of it at any time.
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What does a burn multiple under 1 mean?
The company added more new ARR in the month than it burned. That is rare early on. Read it over three months before drawing a conclusion.
Why is there no burn multiple for some months?
A month where net new ARR or net burn is zero or below has no meaningful ratio. Sondola leaves it blank rather than show a number that reads as good.
Related metrics
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