What is Burn Multiple?
Burn Multiple is a core concept in modern B2B revenue. Here is a clear, accurate definition, why it matters, and how Ardovo handles it.
Short answer
The burn multiple measures how much a startup burns in cash to generate each dollar of new ARR, calculated as net cash burned divided by net new ARR. A lower multiple means more efficient growth. It is a favored efficiency metric because it captures the full cost of growth in a single figure.
Key takeaways
- Net cash burned divided by net new ARR added.
- Lower is better: less cash burned per dollar of growth.
- Captures full growth efficiency in one number.
- Popular for judging capital-efficient startups.
Why it matters
In a tighter funding climate, efficient growth matters more than growth at any cost. The burn multiple exposes how much capital a company consumes to grow, rewarding discipline.
How Ardovo handles it
Ardovo gives finance clean net new ARR figures tied to real bookings and churn, the numerator's counterpart, so the burn multiple rests on accurate revenue data rather than spreadsheet estimates.
Frequently asked questions
How is burn multiple calculated?
Divide net cash burned in a period by the net new ARR added in that period. A company that burned 2 million dollars to add 1 million dollars of net new ARR has a burn multiple of 2.
What is a good burn multiple?
Lower is better. Under 1 is excellent, 1 to 1.5 is good, and above 2 suggests inefficient growth. The right target depends on stage, since early companies often burn more per dollar of ARR.