Finance
Burn Multiple Calculator
Measure growth efficiency by net burn to net new ARR ratio. The lower the index, the better. Type in your actual number or drag the slider to play with demo parameters.
= 2.000.000.000 ₫
= 1.500.000.000 ₫
Burn Multiple
1–1.5×: good efficiency, healthy growth model for investors.
This frame of reference merges with the recurring revenue model (SaaS); Other industries need separate thresholds. Negative net burn means the company generated positive cash flow during the period.
What is Burn Multiple and why does it indicate the quality of growth?
Burn Multiple shows how many dollars of net capital a business must use to generate one new dollar of recurring revenue. Investors are interested because two businesses with the same growth rate can still consume resources very differently; This index helps distinguish whether growth comes from operational efficiency or from spending a lot of money.
Dùng công cụ này khi nào
- When summarizing a quarter or a year, it is necessary to evaluate whether the amount of capital used is commensurate with the increased recurring revenue.
- When preparing to call for capital, it is necessary to prove that the business uses capital with discipline, not just growth through heavy spending.
- When comparing performance between periods or between growth channels, to decide where to continue to put resources.
Basic calculation
Burn Multiple = Net burn during the period ÷ Net new ARR during the period
First, calculate the actual amount of money lost during the period, not counting the capital invested by investors, because that is the source of compensation, not the business results. Next, calculate the increase in annual recurring revenue in the same period, minus the loss due to customers stopping using or reducing packages. Take the first number and divide it by the second number. The lower the result means the same amount of capital generates more new recurring revenue, meaning the more efficient the use of capital.
Ví dụ: In one year, the business lost 2 billion VND in net cash, and at the same time ARR increased from 3 billion VND to 4.5 billion VND. Net new ARR is 1.5 billion VND, Burn Multiple is 2 ÷ 1.5, or about 1.33 times: the business needs about 1.33 VND of net capital to create one new recurring revenue.
Thuật ngữ trong công cụ
- ARRAnnual recurring revenue
- Recurring revenue refers to a year from active contracts or subscriptions. With the monthly revenue model, ARR is equal to the recurring revenue of the month multiplied by 12. Only regular recurring revenue is counted, not one-time revenue.
- Net new ARRNet new ARR
- The increase in ARR in the period after compensation is equal to the ARR at the end of the period minus the ARR at the beginning of the period. This number includes both new customers, customers upgrading packages, and losses due to customers leaving or downgrading packages.
- Net burnNet burn
- The actual amount of cash lost during the period is equal to cash spent minus cash received from business activities. Do not add investors' capital contributions to the revenue section, because the goal is to measure operating results.
- Burn MultipleBurn multiple
- The amount of net capital needed to create a new ARR coin. Unlike pure growth indexes, this index reflects the price paid for growth, so the lower the better.
- Lost revenueRevenue churn
- ARR portion lost during the period due to customers stopping using the service or switching to a lower package. This is a direct deduction from net new ARR, so high lost revenue will push Burn Multiple up quickly.
- Measurement periodMeasurement period
- The time period used for calculation is usually a quarter or a year. Net burn and net new ARR must be taken in the same period; If it is out of period, the results no longer have comparative meaning.
Đọc kết quả thế nào
Less than 1 time
Capital efficiency is very high, each dollar of net loss creates more than a dollar of new recurring revenue. This is a level not many businesses achieve and is often highly appreciated by investors.
1 – 1.5 times
Good level according to industry practice, showing growth accompanied by spending discipline. About 1.5 to 2 times is still acceptable but need to monitor the trend each quarter.
Over 3 times
Capital use efficiency is at a low level. You should review the cost structure, effectiveness of each growth channel and customer churn rate before expanding scale or calling for more capital.
Results from the tool are for reference only, based on the data you enter and assuming constant income and expenditure levels. This is not investment advice or a commitment by the Fund as to its funding capacity.
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