Calculator
Debt based on the ARR of a software company
The calculator applies two ARR multiples of your choice and measures their effect on cash. It gives the debt range, the cash runway with and without debt and the weight of interest in recurring gross profit.
Indicative debt range
€7.50m to €15.00m
Without debt, cash covers 10.0 months of burn. With the high end, it covers 20.4 months. ARR reaches €35.00m in twelve months and the installed base, with no new sales, reaches €27.50m.
| Item | Low end | High end |
|---|---|---|
| ARR multiple | 0.30x | 0.60x |
| Debt | €7.50m | €15.00m |
| Annual interest | €0.75m | €1.50m |
| Cash runway with the debt | 15.4 months | 20.4 months |
| Debt to installed base in twelve months | 0.27x | 0.55x |
| Debt to recurring gross profit | 0.40x | 0.80x |
| Interest as % of recurring gross profit | 4.00% | 8.00% |
The initial values, including the ARR multiples, are sample inputs to replace with your own figures and with the terms lenders offer. This calculation gives an order of magnitude and commits no lender.
Method
The calculation formulas
ARR (annual recurring revenue) is the annual recurring revenue of the subscriptions in force. Net revenue retention compares the revenue of the customers present twelve months ago with their revenue one year later, upsell included. The debt is assumed to be drawn in one go and repaid at maturity: its interest adds to the monthly cash burn.
Debt range
Debt = ARR × chosen multiple, for the low end and for the high end
Cash runway
Runway = (cash + debt) ÷ (monthly burn + debt × rate ÷ 12)
Installed base
Installed base in twelve months = ARR × net retention; debt to installed base = debt ÷ installed base
Example
Worked example
A software company generates €25.00m of ARR with a gross margin of 75.00%. It holds €12.00m of cash and burns €1.20m a month, which gives 10.0 months of runway. With chosen multiples of 0.30x and 0.60x, the debt ranges from €7.50m to €15.00m. At 10.00%, the high end costs €1.50m of interest a year and extends the runway to 20.4 months. The multiples and the rate of this example are sample inputs.
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