# The burn multiple

> Net burn over net new ARR on Northwind Care's plan quarter, with the formula's author cited and its undefined case handled.

Source: https://lopifi.com/learn/saas-metrics-and-unit-economics/burn-multiple
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is the burn multiple, and how is it calculated?** Net burn over net new ARR on Northwind Care's plan quarter, with the formula's author cited and its undefined case handled.

If the plan burns $45,000 net in a quarter while ARR goes from $54,000 to $108,000, the burn multiple is 0.83×: dollars burned for each dollar of net new ARR. Lower is better. The formula comes from an investor's post, not a standard. Thresholds you'll hear quoted are opinions, so cite whoever said them.

> “Burn Multiple = Net Burn / Net New ARR”

— [David Sacks, “The Burn Multiple” (April 23, 2020)](https://sacks.substack.com/p/the-burn-multiple-51a7e43cb200), The origin of the burn multiple — an investor's heuristic, not a standard

## Where this page's rules come from

- [David Sacks, “The Burn Multiple” (April 23, 2020)](https://sacks.substack.com/p/the-burn-multiple-51a7e43cb200) — The origin of the burn multiple — an investor's heuristic, not a standard (reference)

## Read further

- https://lopifi.com/md/calculators/rule-of-40
- https://lopifi.com/md/calculators/magic-number
- https://lopifi.com/md/accounting/burn-multiple

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- **Terms taught:** [Burn multiple](https://lopifi.com/md/glossary/burn-multiple), [Net burn](https://lopifi.com/md/glossary/net-burn), [ARR](https://lopifi.com/md/glossary/arr)
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