Burn Rate Calculator
Burn rate is how fast cash leaves the business. Enter your expenses and revenue to see gross burn, net burn, quarterly burn and your burn multiple.
Inputs
Used for the burn multiple.
Result
$50,000
net monthly burn
Gross burn is $85,000 a month; after $35,000 of revenue, net burn is $50,000. Against $42,000 of net new ARR that is a burn multiple of 1.19 — great by the standard scale.
- Gross burn
- $85,000
- Net burn
- $50,000
- Quarterly net burn
- $150,000
- Annual net burn
- $600,000
- Payroll share of burn
- 61.18%
- Burn multiple
- 1.19 (great)
Formula
- gross burn = total monthly operating expenses
- net burn = gross burn − monthly revenue
- burn multiple = net burn ÷ net new ARR added
- annual burn = net burn × 12
Methodology
Gross burn is every dollar going out the door; net burn is what remains after revenue offsets it. Runway depends on net burn, but gross burn shows how large the cost base would be if revenue disappeared.
The burn multiple, popularised by David Sacks, divides net burn by net new ARR and answers a single question: how many dollars do you burn to add one dollar of recurring revenue? Under 1 is exceptional, 1-1.5 great, 1.5-2 good, 2-3 suspect, above 3 problematic.
Payroll usually accounts for 60-70% of burn at a software company, which is why hiring plans are the main lever on the number.
These are modelling estimates based on standard SaaS metric definitions. Real results depend on your billing data, contract terms and accounting treatment, so reconcile against your finance system before reporting numbers externally.
Example calculation
- Monthly costs: $52,000 payroll, $12,000 marketing, $9,000 infrastructure, $12,000 other = $85,000 gross burn.
- With $35,000 of revenue, net burn is $50,000 a month, or $150,000 a quarter.
- The company added $42,000 of net new ARR that month.
- Burn multiple: $50,000 ÷ $42,000 = 1.19 — 'great' on the standard scale.
Frequently asked questions
What is a good burn multiple?
Under 1 is exceptional, 1-1.5 great, 1.5-2 good, 2-3 warrants attention and above 3 means growth is very expensive relative to what it produces.
Gross burn or net burn — which should I report?
Report both. Boards track net burn for runway and gross burn to understand the fixed cost base and how quickly it could be reduced if needed.
Should capital expenditure count in burn?
Include anything that leaves the bank account in the month it does. Burn is a cash measure, so a large one-off purchase belongs in that month even if accounting spreads it over years.
How do I reduce burn without stalling growth?
Cut spend with the weakest payback first — underperforming channels, unused tooling and speculative hires. Protect anything with a measured CAC payback under twelve months.
Is a high burn rate always bad?
No. High burn producing high net new ARR is efficient capital deployment. The problem is high burn with flat revenue, which the burn multiple exposes immediately.
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