The burn multiple is calculated by dividing net cash burned by net new ARR added in the same period. A burn multiple below 1x is considered excellent, while above 2x signals inefficient growth spending.

Example: A SaaS startup burns $500,000 in cash in a quarter while adding $400,000 in new ARR. The burn multiple is 1.25x, meaning the company spends $1.25 for every $1 of new ARR generated.