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.
