Venture Metric
Authoritative Source
Burn Multiple
Efficiency metric measuring net cash burned relative to net new ARR generated.
Detailed Definition & Corporate Finance Context
Burn Multiple serves as a vital financial metric in corporate FP&A, treasury management, and institutional valuation. Governed by Venture Metric, monitoring Burn Multiple allows CFOs and finance leaders to optimize capital allocation, refine financial forecasts, and communicate performance to investors.
In enterprise corporate FP&A models and ERP financial planning suites (Oracle NetSuite PBCS, SAP Analytics Cloud, Anaplan), tracking Burn Multiple provides real-time visibility into operational margin efficiency and cost structure leverage.
Mathematical Standard & Equation
Burn Multiple = Net Cash Burned ÷ Net New ARR Created
Common Operational Pitfalls
- Conflating reported GAAP net income with cash flow generated from core operations.
- Failing to normalize non-recurring add-backs when calculating adjusted EBITDA metrics.
- Relying on static annual budgets rather than rolling 12-month FP&A forecasts.