SaaS Burn Multiple, Magic Number and Rule of 40 Calculator

How efficiently is your SaaS turning cash into growth?

Investors read three numbers before they read your deck: burn multiple, magic number and the Rule of 40. Enter one quarter of revenue and burn to see all three, your runway, and what you would need to change to reach a 1.5 burn multiple.

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1. Your quarter

This quarter's recognised revenue ($)

Last quarter's recognised revenue ($)

Net burn this quarter ($, cash out minus cash in)

Net new ARR this quarter ($, optional)

Last quarter's sales and marketing spend ($, optional)

Revenue, same quarter a year ago ($, optional)

Cash on hand ($, optional)

Enter your numbers, then click Calculate metrics.

The model, and what it leaves out

Net new ARR is what you enter, or else (this quarter's revenue - last quarter's revenue) x 4. That proxy ignores usage and one-off revenue, so use billing-system ARR when you have it.
Burn multiple = net burn / net new ARR. Magic number = (revenue change x 4) / prior-quarter sales and marketing spend. Rule of 40 = year-over-year growth + free cash flow margin, where margin = -net burn / revenue. Runway = cash / (net burn / 3).
Not modelled: seasonality, annual-prepay cash timing, one-off financing or capex inside net burn, FX, and cohort quality. The bands are widely quoted rules of thumb, not standards, and vary by stage and market.

Common questions

What is a good burn multiple?

Commonly quoted bands: under 1 is amazing, 1 to 1.5 great, 1.5 to 2 good, 2 to 3 suspect and over 3 bad. Earlier-stage companies tend to run higher multiples than later-stage ones, so compare with companies at your stage rather than a single number.

How do you calculate burn multiple?

Net burn divided by net new ARR for the same period. Net burn is cash out minus cash in. Net new ARR is new plus expansion ARR minus churned and contracted ARR. If you do not have ARR data, this tool estimates it as quarter-over-quarter revenue growth times four.

What is the SaaS magic number?

Annualised quarter-over-quarter revenue growth divided by the previous quarter's sales and marketing spend. Below roughly 0.5 suggests go-to-market spend is not converting well; above roughly 0.75 is often read as a signal to invest more.

What is the Rule of 40?

Year-over-year revenue growth plus a profit margin (often free cash flow margin). A score of 40 or more is the usual bar for a healthy SaaS business. This tool uses free cash flow margin derived from your net burn.

Is this financial or investment advice?

No. It applies simple arithmetic to the numbers you enter. The bands are widely quoted rules of thumb, not standards, and none of the metrics replace your own cohort data or a qualified adviser.

Related tool: the SaaS tier price optimizer (the Good-Better-Best price ladder that earns the most from a willingness-to-pay survey).

Writing the monthly update? The investor update builder turns MRR, customers and cash into runway, burn multiple and a default-alive check, then writes the email.