Cash burn rate is how much money a company spends per month. Gross burn is total monthly expenses; net burn is expenses minus revenue — the true monthly drain. Dividing your cash balance by net burn gives your runway: how many months until you run out.
What Is Cash Burn Rate?
Cash burn rate measures how fast a company spends its cash reserves, usually per month. For startups burning investor cash ahead of profitability, it's the metric that determines survival. (During the dot-com era, startups bragged about high burn; today investors prize a low, efficient burn.)
How to Calculate Cash Burn Rate
Gross Burn = Total Monthly ExpensesAll cash going out
Net Burn = Monthly Expenses − Monthly RevenueThe true monthly drain
Burn to runway
Runway is the months of cash left at your current net burn:
Runway = Cash Balance ÷ Net Burn = $1,000,000 ÷ $100,000 = 10 monthsWorked example
What's Included in Cash Burn
| Operating (OpEx) | Non-operating |
|---|---|
| Salaries & wages | Debt payments |
| Rent & utilities | Equipment purchases |
| Marketing | Capital investments |
| Software subscriptions | One-time / legal costs |
Why Burn Rate Matters
- Runway: tells you how long the cash lasts and when to raise.
- Hiring & scaling: aligns growth spend with reserves.
- Resilience: a managed burn survives downturns. Many startups keep 12–18 months of runway — plan it with a cash flow forecast.
Cash Burn Rate FAQ
How do you calculate cash burn rate?
Gross burn is total monthly expenses. Net burn subtracts monthly revenue: Net Burn = Expenses − Revenue. Net burn is the figure that actually drains your bank balance.
What's the difference between gross and net burn?
Gross burn counts all cash going out; net burn nets out incoming revenue. A company with strong revenue can have high gross burn but low net burn.
How do you calculate runway from burn rate?
Divide your cash balance by net burn: Runway = Cash ÷ Net Burn. $1M in the bank at $100K net burn = 10 months of runway.
What is a good burn rate?
There's no universal number — it depends on stage and revenue. The healthy rule of thumb is keeping enough cash for 12–18 months of net burn, giving time to grow or raise.
Related burn-rate metrics
- Cash Burn Rate — the umbrella term for cash spent per month. (you are here)
- Gross Burn Rate — total cash going out (costs only).
- Net Burn Rate — cash out minus cash in — the true monthly drain.
