Monthly Burn Rate

What is Monthly Burn Rate?

Monthly burn rate is how much cash your company spends (net of revenue) each month. If you start the month with $500K and end with $420K, your burn is $80K. It's the most fundamental measure of how fast you're consuming capital.

Burn rate directly determines runway: how long until you run out of money.

Gross Burn vs Net Burn

Gross burn is total spending regardless of revenue. Net burn is spending minus revenue. A company spending $100K/month with $60K revenue has $100K gross burn but only $40K net burn.

Net burn is more relevant for runway calculations since revenue offsets expenses.

Managing Burn Rate

Track burn monthly and forecast forward. Know your runway at all times. Plan fundraising when you have 6+ months of runway remaining. Have a plan to cut burn if needed. Balance growth investment against cash preservation.

Monthly cash analysis:

• Starting cash: $500,000
• Ending cash: $420,000
• Monthly burn: $80,000

At this burn rate with $420K remaining:

Runway = $420,000 ÷ $80,000 = 5.25 months

Time to either raise, cut costs, or reach profitability.