What Is Burn Rate?

Burn rate is the speed at which a company spends its cash reserves, expressed in dollars per month. It is the single most-watched survival metric for startups and any business that is not yet profitable, because it answers the only question that ultimately matters before profitability: how long can we keep operating before the money runs out? A company burning $50,000 a month with $600,000 in the bank has 12 months to reach profitability, raise more capital, or shut down.

There are two versions of the metric, and investors will always ask for both. Gross burn is your total monthly operating spend — salaries, rent, software, marketing, everything. Net burn subtracts the revenue you collect, showing the actual monthly decline in your bank balance. A startup can have a scary-looking gross burn of $200,000 but a perfectly healthy net burn of $10,000 if revenue is strong.

How Burn Rate Is Calculated

This calculator applies exactly these formulas. If your revenue exceeds expenses, net burn goes negative — meaning you are cash-flow positive and your balance grows each month instead of shrinking. According to Investopedia's definition of burn rate, the metric is typically quoted monthly, though fast-moving startups in a downturn sometimes track it weekly.

What Is a Good Burn Rate?

There is no universal "good" dollar figure — a good burn rate is one your runway can survive. The benchmarks most venture investors and accelerators use:

• 12–18 months of runway is the widely accepted healthy zone after a funding round
• Under 6 months of runway is crisis territory — fundraising itself takes 3–6 months, so you may already be out of time
• Burn multiple (net burn ÷ net new recurring revenue) under 1.5 is considered efficient growth; over 2 suggests you are buying growth too expensively
• Seed-stage startups commonly burn $25k–$100k per month; Series A companies often burn $100k–$500k — but the runway rule matters far more than the absolute number

How to Use This Calculator

Enter your current cash balance (bank accounts plus genuinely liquid reserves), your total monthly operating expenses, and — if you have revenue — the cash you actually collect per month. Click calculate to see your gross burn, net burn, runway in months, your projected zero-cash date, and a health verdict against the 12–18 month benchmark. For the most honest picture, use an average of your last three months of expenses rather than a single month, which can be distorted by one-off costs like annual insurance premiums or legal fees.

Worked Example

A SaaS startup holds $500,000 in cash, spends $60,000 per month (gross burn), and collects $20,000 in monthly revenue. Net burn is $40,000 per month, so runway is $500,000 ÷ $40,000 = 12.5 months. That sits right at the edge of the healthy zone: comfortable for now, but since a fundraise typically takes 3–6 months, this founder should begin investor conversations within the next quarter rather than waiting until the balance looks frightening.

How to Reduce Your Burn Rate

• Audit software spend: unused SaaS seats and duplicate tools routinely hide 5–10% of gross burn
• Renegotiate or exit office space: rent is usually the second-largest line item after payroll
• Slow hiring before cutting: a hiring freeze reduces future burn without severance costs or morale damage
• Shift spend to measurable channels: cut marketing you cannot attribute; keep what shows a clear customer acquisition cost
• Collect faster: annual prepay discounts and shorter payment terms improve cash without touching the P&L

Burn Rate vs Runway vs Break-Even

These three metrics form one chain. Burn rate measures monthly cash loss; runway converts that loss into time remaining; and your break-even point tells you the revenue level at which burn hits zero permanently. Track all three monthly, alongside your profit margin — improving margin is often the fastest lever for reducing net burn without cutting a single expense. If you are planning spend levels for the year, our budget planner helps you set the expense ceiling that keeps runway above 12 months.

Frequently Asked Questions