Canonical formula calculator
BURN MULTIPLE
How many dollars you burn for every dollar of new ARR you add — the cleanest measure of capital efficiency.
Worked example
How the number is worked out
A software business spending to grow, measuring what the spending bought.
Starting from
Working
A dollar fifty burned for every dollar of new recurring revenue. The figure is a ratio of efficiency, not of survival — it says how dearly growth was bought, and nothing about how long the money lasts.
What this tells you
Burn multiple is one of the cleanest signals of capital efficiency. It tells you how many dollars you burn for every dollar of new annual recurring revenue you add. Under 1.0 is excellent. Between 1.0 and 1.5 is good. Between 1.5 and 2.0 is suspect. Above 2.0 is a warning sign that you are spending too much to grow.
When to use it
Track burn multiple quarterly. Use it to compare your capital efficiency across periods, against industry benchmarks, or against the unit economics implied by your fundraising plan. If your burn multiple is climbing, you are getting less efficient at growth — fix it before raising more money.
What it doesn’t tell you
Burn multiple is a snapshot of efficiency, not direction. A 1.5 burn multiple that is trending down is a different reality than a 1.2 burn multiple that is trending up. It also does not account for the natural inefficiency of early-stage growth — a brand new business will have a high burn multiple by definition, and that is fine until it is not.
Reckon it, don’t just calc it
A calculator gives you today’s number. Reckon takes your plan to make your own money and checks it against what’s real — your margin, your price, what it takes to hit the take-home you want. No AI, no guessing — the same input always gives the same answer.