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.
Frequently asked questions
What is burn rate?
Burn rate is how fast a company spends its cash reserves, usually expressed per month. It is a key metric for startups operating before they are profitable.
What is the difference between gross and net burn?
Gross burn is total monthly spending; net burn is spending minus revenue. Net burn shows how quickly your cash balance is actually shrinking.
How does burn rate relate to runway?
Runway is your cash balance divided by net monthly burn — the number of months before you run out of money at the current rate.
How can a startup reduce its burn rate?
By cutting non-essential costs, growing revenue, renegotiating contracts, or slowing hiring. Lower burn extends runway and reduces fundraising pressure.
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.