Burn Multiple
David Sacks's measure of how much cash you burn to add one unit of new annual recurring revenue. The higher it gets, the more each unit of growth costs.
Real Growth and CashTerm 56 / 81
Formula
Burn multiple = Net burn ÷ Net new ARR
In practice
The denominator is net new ARR, with churn and contraction already taken out; use gross bookings and the multiple looks better than it is. A single quarter can swing hard, and one large contract can distort the number for a period (rule of thumb). Read the trend. In a profitable company there is no burn and the number means nothing. For bands, use the calculator.