Finance
Burn Multiple Calculator
= 2.000.000.000 ₫
= 1.500.000.000 ₫
Burn Multiple
1–1.5×: good efficiency, healthy growth model for investors.
How this tool helps and the terms you need to know
When to use this tool
- When preparing data for capital calling documents.
- When you need a quick estimate before discussions with investors.
- When comparing efficiency across periods or across growth channels, to decide where to keep concentrating resources.
Basic calculation
Burn Multiple = Net burn for the period ÷ Net new ARR for the period Net burn = Cash out − Cash in for the period (excluding investor capital) Net new ARR = Ending ARR − Beginning ARR
Start by calculating how much cash the business actually consumed during the period, excluding capital injected by investors, since that is a funding source rather than a business result. Next, calculate the annual recurring revenue added over the same period, net of revenue lost to customers who cancelled or downgraded. Divide the first figure by the second. The lower the result, the more new recurring revenue each unit of capital generates, meaning capital is being used more efficiently.
Example: Over one year, a business consumes a net VND 2 billion in cash while its ARR grows from VND 3 billion to VND 4.5 billion. Net new ARR is VND 1.5 billion and the Burn Multiple is 2 ÷ 1.5, or roughly 1.33x: the business needs about VND 1.33 of net capital to generate VND 1 of new recurring revenue.
Terms used in this tool
- ARRAnnual recurring revenue
- Recurring revenue from active contracts or subscriptions, annualised. For a monthly billing model, ARR equals monthly recurring revenue multiplied by 12. Only regularly repeating revenue counts; one-off revenue is excluded.
- Net new ARRNet new ARR
- The ARR added during the period on a net basis, calculated as ending ARR minus beginning ARR. This figure already nets new customers and upgrades against revenue lost to churn and downgrades.
- Net burnNet burn
- The cash actually consumed during the period, calculated as cash out minus cash in from business operations. Investor capital is not counted as cash in, because the aim is to measure operating performance.
- Burn MultipleBurn multiple
- The amount of net capital consumed to generate one unit of new ARR. Unlike pure growth metrics, this ratio reflects the price paid for growth, so lower is better.
- Revenue churnRevenue churn
- ARR lost during the period because customers stopped using the service or moved to a lower tier. It is deducted directly from net new ARR, so high revenue churn pushes the Burn Multiple up quickly.
- Measurement periodMeasurement period
- The time window used for the calculation, usually a quarter or a year. Net burn and net new ARR must be taken over the same period; if the periods differ, the result is no longer meaningful for comparison.
How to read the results
Below 1x
Capital efficiency is very high — each unit of net cash consumed generates more than one unit of new recurring revenue. Few businesses reach this level and investors generally regard it highly.
1 – 1.5x
A good level by industry convention, showing growth paired with spending discipline. The 1.5 to 2x range is still acceptable but the quarter-on-quarter trend should be monitored.
Above 3x
Capital efficiency is low. Review the cost structure, the performance of each growth channel and the churn rate before scaling up or raising more capital.
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