What is Gross Burn vs Net Burn?
Gross burn is your total monthly spending, everything that goes out the door. Net burn is spending minus revenue, the actual cash you're losing each month. The difference is your revenue offset.
A company spending $100K/month with $40K revenue has $100K gross burn but only $60K net burn. Revenue extends runway by reducing the actual cash drain.
Why Both Metrics Matter
Gross burn shows operational scale and cost structure. Net burn shows actual cash consumption and runway. You need both to understand financial health.
Investors often ask about both. Gross burn reveals what it costs to run the business. Net burn reveals how quickly you'll need more capital.
Runway Calculations
Runway can be calculated from either, but net burn is more relevant. Gross burn runway assumes zero revenue. Net burn runway reflects your actual cash consumption rate.
Gross Burn = Total Monthly Operating Expenses
Net Burn = Total Expenses - Total Revenue
Net Burn = Gross Burn - Revenue
Your SaaS startup tracks monthly cash flow:
- Total expenses (Gross Burn): $200,000
- Revenue: $75,000
- Net Burn: $200,000 - $75,000 = $125,000
With $1.5M in the bank:
Gross Runway = $1.5M ÷ $200K = 7.5 months
Net Runway = $1.5M ÷ $125K = 12 months
Revenue gives you 4.5 extra months of runway.