Burn Multiple
How much cash the company burns to add one dollar of new annual recurring revenue.
The fork, why two teams get different numbers
Net burn ÷ net new ARR is the canonical form, but both terms fork. Burn: net vs
gross. Denominator: net new ARR (after churn) vs gross new ARR vs net new
recognized revenue. A team having a rough churn quarter prefers gross new ARR, a
bigger denominator and a smaller, prettier multiple; an efficiency-focused board
insists on net new ARR. Because the denominator can be small, tiny definitional
differences swing the multiple dramatically.
The trap
The metric explodes toward infinity as net new ARR approaches zero, so a single soft quarter produces an alarming multiple that says more about the small denominator than about efficiency.
- The full trap, worked on a real export
- Every formula variant, spelled out
- The reconciliation anchor, what to tie it to and when to refuse
Reference: Non-GAAP efficiency metric, no authoritative standard · ARR is a non-GAAP operating measure