How to Calculate Burn Multiple
What is Burn Multiple?
Divides cash burn rate by monthly recurring revenue to show how many months of revenue are burned monthly. Indicates runway efficiency.
Step-by-Step Guide
- 1Calculate monthly cash burn (expenses - revenue)
- 2Divide by MRR
- 3Result < 1.0 is positive; >1.0 indicates spending more than earning
- 4Track monthly to spot trends
Worked Examples
Input
$50k spend, $10k ARR
Result
5.0x
Common Mistakes to Avoid
- ✕Not separating one-time costs from recurring
- ✕Ignoring non-cash expenses in burn calculation
Frequently Asked Questions
What's a healthy burn multiple?
Ideally < 0.75; >1.0 unsustainable long-term; >2.0 indicates severe cash problems.
How do I improve burn multiple?
Reduce expenses, increase revenue per user, or accelerate growth to justify burn.
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