Stage 4 · Run the company
Burn Multiple and Rule of 40 Calculator
How much cash you burn for each dollar of new ARR, and your Rule of 40 score.
Free, no sign-up. Your numbers stay in your browser.
Please note. This tool is for education and planning. It gives estimates, not financial advice. Results are estimates based on what you enter. Full disclaimer · How we build the numbers
What this tool does
Burn multiple tells you how efficiently you turn cash into growth: net burn divided by net new ARR. The Rule of 40 adds your growth rate to your profit margin; 40 or more is considered strong.
How to use it
- Pick a period: the last 12 months is most stable.
- Enter net burn and ARR at the start and end.
- Add your profit margin for the Rule of 40 score.
The maths, in plain view
- Burn multiple = Net burn ÷ Net new ARR
- Net new ARR = ARR(end) − ARR(start)
- Rule of 40 = ARR growth % + profit margin %
A worked example
A company that burned $1.2M while ARR grew from $0.9M to $1.8M has a burn multiple of 1.33x (great). With 100% growth and a -45% margin its Rule of 40 score is 55.
Tips
- Compare quarters, not single months: one large deal can distort a month.
- If the multiple is rising, check CAC and churn before cutting growth spend.
Want the full story? Read Burn multiple is the ratio your next investor will calculate.
Questions people ask
What is a good burn multiple?
Under 1x is exceptional, 1-1.5x great, 1.5-2x good, 2-3x worth a closer look and above 3x a warning sign for a venture-backed SaaS company. Very early companies often run higher while they find their channels.
How is burn multiple different from CAC payback?
CAC payback looks at sales and marketing only. Burn multiple uses all the cash you burn, including product, G&A and hiring ahead of growth, so it shows company-wide efficiency.
Does the Rule of 40 apply to early-stage startups?
It's mostly used for scaled software companies. For seed and Series A companies, investors usually focus on growth, retention and burn multiple instead.
Keep going
Startup Runway Calculator
How many months your cash lasts, your cash-out month, and whether you are default alive.
Stage 1 · Build the modelLTV : CAC and Payback Calculator
Customer lifetime value, acquisition cost, LTV : CAC ratio and CAC payback in months.
Stage 2 · Plan the raiseHow Much Should I Raise? Calculator
Size your round from your burn, the runway you want and the cash you'll have when it closes.
Related reading: How to build a 13-week cash flow forecast and use it every Monday