Burn Rate Calculator
Calculate monthly gross and net burn rate for your startup or business.
What is burn rate?
Burn rate is the speed at which a company spends its cash reserves — typically measured monthly. It is one of the most closely watched metrics in the startup world because it directly determines runway: how long the company can survive before needing additional funding.
The term originated in the venture capital industry during the dot-com era, when startups routinely raised large rounds and spent aggressively on growth before generating meaningful revenue. Today it is tracked by founders, investors, and boards as a core financial health indicator.
Gross burn vs. net burn
Gross burn = (Starting cash − Ending cash) ÷ Months
Net burn = Gross burn − Monthly revenue
Runway = Current cash ÷ Monthly net burnGross burn is the total amount of cash your company spends each month across all categories — payroll, rent, cloud infrastructure, marketing, and everything else. It measures your total cost base regardless of revenue.
Net burn subtracts monthly revenue from gross burn. A company with $100K gross burn and $40K monthly revenue has a $60K net burn. If that company has $600K in the bank, its runway is 10 months. Net burn is what investors actually care about — it tells them how efficiently the company is converting cash into growth.
Runway benchmarks
| Runway | Status | Recommended action |
|---|---|---|
| < 6 months | Critical | Start fundraising immediately or cut costs aggressively |
| 6–12 months | Caution | Begin fundraising now — takes 3–6 months on average |
| 12–18 months | Adequate | Comfortable but monitor closely; begin prep for next round |
| 18–24 months | Healthy | Strong position; focus on growth and milestones |
| > 24 months | Excellent | Maximum flexibility; can be selective about fundraising terms |
A common rule of thumb: always maintain at least 12–18 months of runway, and start your next fundraising process when you have 9–12 months remaining. Fundraising takes longer than founders expect — 3 to 6 months is typical for seed and Series A rounds.
What drives high burn rates?
How to reduce burn rate
- Audit headcount ruthlessly. With payroll typically 60–80% of burn, every hire has an outsized impact. Delay non-critical hires; ensure every role has a clear revenue or retention impact.
- Cut infrastructure costs. Review cloud spend — many startups overprovision by 30–50%. Use reserved instances, right-size databases, and implement spending alerts.
- Negotiate contracts. Ask every vendor for startup discounts, annual prepayment discounts, or extended payment terms. Many will agree rather than lose the customer.
- Defer non-essential spending. Fancy offices, offsites, and perks can wait. Focus discretionary spend on things that directly accelerate revenue or improve retention.
- Accelerate revenue. The most sustainable way to reduce net burn is to grow revenue. Focus on shortening the sales cycle, improving trial-to-paid conversion, and reducing churn.
Gross Burn = (Starting cash − Ending cash) / Months Net Burn = Gross Burn − Monthly revenue Gross burn is total cash spent. Net burn subtracts revenue. Investors track burn rate closely — high burn with low growth is a red flag.