Understanding your burn rate results
These figures describe cash consumption over the specific period entered; they extrapolate forward only under the assumption that spending and revenue continue at the same rates.
| Metric | What it tells you |
|---|---|
| Net burn rate | The actual pace of cash decline per month, after revenue is factored in. |
| Gross burn rate | Total monthly spending before revenue is subtracted — the full scale of operating costs. |
| Implied runway | How many more months the ending cash balance would last if net burn stayed constant. |
- This calculator assumes net burn and revenue remain constant going forward — actual runway can differ if spending or revenue changes, or if cash inflows such as financing are excluded from the balances entered.
- Runway is capped conceptually at 999 months in the underlying calculation when net burn is zero or negative (i.e., the business is cash-flow positive over the period), since a declining or flat burn produces no meaningful finite runway figure.
What is burn rate?
Burn rate is the rate at which a business spends its cash reserves, typically expressed as a dollar amount per month. It is a standard metric used by startups and their investors to track cash consumption and estimate how long a company can continue operating before it runs out of funds or needs additional financing.
Net burn rate is the actual monthly decline in the cash balance — it already accounts for any revenue coming in. Gross burn rate is total monthly spending before subtracting revenue, so it shows the full scale of operating costs regardless of how much revenue offsets them.
Net burn is calculated from the change in cash balance over a period: the difference between starting and ending cash, divided by the number of months elapsed. Gross burn is derived by adding back monthly revenue to net burn, since net burn already reflects revenue's offsetting effect on cash.
How to use this burn rate calculator
- Enter the cash balance at the start of the period being analyzed.
- Enter the cash balance at the end of that same period.
- Enter the number of months between the two balances.
- Enter average monthly revenue for the period, so gross burn (total spending before revenue) can be calculated alongside net burn.
- Read net burn (the actual monthly cash decline), gross burn (total monthly spending), and the implied runway in months at the current net burn rate.
The formula behind burn rate
Net burn is the total cash consumed over the period, divided by the number of months. For example, with $500,000 in starting cash, $380,000 in ending cash, and 6 months elapsed, net burn is ($500,000 − $380,000) ÷ 6 = $20,000 per month.
Gross burn adds monthly revenue back to net burn, since net burn already reflects revenue offsetting spending. With $10,000 in average monthly revenue, gross burn is $20,000 + $10,000 = $30,000 per month — the true scale of monthly operating spend before revenue is considered.
Implied runway divides the ending cash balance by net burn to estimate how many more months the current cash balance would last at the same net burn rate: $380,000 ÷ $20,000 = 19 months.
Common mistakes
- Confusing net burn with gross burn — net burn already reflects revenue's offsetting effect, while gross burn shows total spending independent of revenue.
- Using a short, unrepresentative period (e.g., one unusually high- or low-spend month) to project burn rate forward, which can distort the runway estimate.
- Including one-time cash inflows or outflows (such as a financing round or a large one-time purchase) in the starting or ending cash balance without adjusting for their non-recurring nature.
- Treating the implied runway as a fixed deadline rather than an estimate that changes as spending, revenue, or cash balance changes.
Häufig gestellte Fragen
What is the difference between net burn and gross burn?
Net burn is the actual monthly decline in cash after revenue is factored in, while gross burn is total monthly spending before subtracting revenue. Gross burn is always equal to or greater than net burn, since net burn nets out whatever revenue is collected.
How is burn rate calculated?
Net burn is calculated by taking the difference between a starting and ending cash balance and dividing by the number of months elapsed. Gross burn adds average monthly revenue back to net burn, since net burn already reflects revenue's offsetting effect on the cash balance.
What is a healthy burn rate?
There is no single universal healthy burn rate — it depends on the cash balance available, the stage of the business, and its growth plans. Burn rate is typically evaluated together with runway (how many months the current cash would last at that burn rate) rather than as a number in isolation.
How does burn rate relate to runway?
Runway is the cash balance divided by the burn rate, expressed in months — it estimates how long the business can continue operating before running out of cash at the current spending pace. A lower burn rate relative to cash on hand produces a longer runway.
Quellenangaben
- U.S. Small Business Administration. Manage your finances — cash flow guidance. sba.gov.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. 13th ed. McGraw-Hill Education, 2020.
- Y Combinator. Startup Library — managing runway and burn rate. ycombinator.com.