Growth has a cash cost.
Burn multiple divides a period’s net cash consumption by the ARR added across that same period. It helps distinguish capital-intensive growth from growth achieved with less cash consumption.
Do not annualize the burn again when using quarterly burn and the ARR increase across that quarter. ARR is already a run rate. Flat or declining ARR provides no positive growth denominator and cannot be interpreted as efficient growth.
The formula, made clear.
- Net cash burn
- Cash consumed during the measurement window; negative means cash generated.
- Net new ARR
- The change between two ARR snapshots bounding that window.
Put the numbers in context.
$600,000.00 quarterly net burn while ARR rises by $600,000.00 gives 1×. The cash burn is not multiplied by four.
| Input | Example value |
|---|---|
| Net cash burn during the period | $600,000.00 |
| Opening ARR | $2,000,000.00 |
| Closing ARR | $2,600,000.00 |
| Burn multiple | 1× |
What this calculation assumes
Matched period and consistent ARR definitions. Zero or negative ARR growth yields an undefined efficiency ratio. Negative burn with growing ARR indicates cash generation; it is not a negative cost to acquire customers.
Methodology references
What to consider next.
Reconcile the ARR change to the MRR bridge and inspect acquisition cost and retention separately.
How we approach financial models →