Burn rate is the rate at which a company spends its cash reserves, typically measured monthly. Net burn rate is total cash spent minus revenue. Gross burn rate is total operating expenses. It's critical for startups and growing businesses to know how many months of cash they have left (runway).
Key Moves
- Net burn rate = Starting cash − Ending cash (includes revenue)
- Gross burn rate = Total monthly operating expenses (ignores revenue)
- Runway = Cash reserves / Net burn rate = months until cash runs out
- Most investors want 12–18 months of runway
- Track burn rate weekly during early stages — monthly is too slow
See Cash Flow Calculator and managing cash flow during business growth for more on this.
Frequently Asked Questions
What's a healthy burn rate?
It depends on stage. Pre-revenue startups may burn $50K–$500K/month. Post-revenue businesses should aim for profitability or near-breakeven.
How do I reduce my burn rate?
Cut non-essential expenses, delay hires, negotiate vendor terms, or increase revenue through pricing or sales.
What's the difference between gross and net burn?
Gross burn is total expenses. Net burn is expenses minus revenue. A business with $100K expenses and $40K revenue has $60K net burn.