Burn Multiple

The burn multiple tells you how much cash you burn to generate each pound of new recurring revenue. You divide your net cash burn over a period by the net new ARR you added in that same period. A burn multiple of 1 means you spent a pound to add a pound of ARR; a multiple of 3 means you spent three pounds for every pound gained, which is expensive growth.

It is one of the clearest measures of capital efficiency, and it matters most when cash is tight. Below 1.5 is excellent, above 2 is a flag to investigate. For a bootstrapped or lean founder the burn multiple keeps you honest about whether growth is actually affordable or just borrowed time. A rising multiple usually means the easy customers are gone and you are paying more to reach the next ones, so it is an early signal to rework your acquisition or pricing before the runway runs out.