BURN RATE
How long does your cash last?
Burn rate is the cash the business uses each month after revenue. It turns today's cash balance into a deadline you can plan around.
THE CORE MATH
Net burn includes revenue.
Start with all monthly operating expenses. Take away cash collected in the same month. The remaining amount is net burn.
EXAMPLE
$300,000 in cash, $80,000 in expenses, and $30,000 collected each month
The business has $50,000 of net burn each month. At that pace, $300,000 lasts six months.
- Gross burn
- $80,000
- Net burn
- $50,000
- Runway
- 6 months
EXTEND RUNWAY
Set the runway you need, then find the monthly gap.
A longer runway comes from more cash, more cash collected, lower expenses, or a combination. The target shows the monthly reduction required at today's cash balance.
Gross burnAll monthly cash paid out
Net burnMonthly cash paid out less cash collected
RunwayCurrent cash divided by monthly net burn
QUESTIONS
Burn rate questions
How do you calculate burn rate?
Subtract monthly cash collected from monthly cash paid out. If expenses are higher than revenue, the difference is your monthly net burn.
What is the difference between gross burn and net burn?
Gross burn is total monthly operating expenses. Net burn accounts for revenue, so it shows how much cash the business actually uses each month.
How do you calculate cash runway?
Divide current cash by monthly net burn. With $300,000 in cash and $50,000 in monthly net burn, runway is six months.
Should unpaid invoices count as revenue?
For a cash-runway estimate, count cash you expect to collect in the month. Keep invoices with uncertain timing separate until you have a realistic collection date.
What is a healthy burn rate?
There is no universal number. It depends on current cash, revenue growth, funding options, and how quickly the business can reduce spending if needed.