Burn Rate Calculator (Gross & Net)
Calculate your startup's Gross and Net Burn Rate to understand cash flow and financial runway. Enter your starting and ending cash balances, the period length, and revenue collected.
Gross Burn Rate
$16,667
Avg. Monthly Cash Outflow
Net Burn Rate
$10,000
Avg. Monthly Net Cash Change
Understanding Burn Rate
Burn rate is a critical metric for startups and businesses, especially those not yet profitable. It measures the speed at which a company is spending its venture capital or cash reserves to finance overhead before generating positive cash flow from operations. Understanding burn rate is essential for financial planning and determining the company's runway – how long it can operate before running out of money.
Gross Burn Rate vs. Net Burn Rate
It's important to distinguish between two types of burn rate:
- Gross Burn Rate: This is the total amount of operating
costs the company incurs monthly, regardless of revenue. It reflects the
total cash outflow on expenses.
Formula: (Starting Cash - Ending Cash) / Number of Months - Net Burn Rate: This is the total amount of money a company
loses each month after accounting for revenue (cash inflow).
Formula: (Starting Cash - Ending Cash - Revenue Earned) / Number of Months
Alternatively: Gross Burn Rate - Monthly Revenue
A negative Net Burn Rate indicates the company is generating more cash than it's spending (Net Gain), meaning it's cash-flow positive for the period.
How to Calculate Burn Rate
To calculate your burn rate using the tool above:
- Determine the Period: Choose a specific time frame (e.g., last quarter, last 6 months). Enter the number of months in this period.
- Find Starting Cash Balance: Identify your company's total cash on hand at the beginning of the period.
- Find Ending Cash Balance: Identify the total cash on hand at the end of the period.
- Determine Revenue (for Net Burn): Sum up all cash inflows (revenue collected, not just booked) during the period.
- Enter the Values: Input these figures into the calculator.
The calculator will show your average monthly Gross Burn Rate (total cash spent per month) and Net Burn Rate (net cash lost or gained per month).
Why is Burn Rate Important?
- Financial Runway: Dividing your current cash balance by your Net Burn Rate estimates how many months the company can operate before needing additional funding.
- Spending Efficiency: Tracking burn rate helps monitor spending and identify areas for potential cost savings.
- Fundraising: Investors scrutinize burn rate to assess capital efficiency and determine funding needs.
- Operational Planning: It informs decisions about hiring, expansion, and budget allocation.
Use our free Burn Rate calculator to get a clear picture of your company's cash consumption and plan for the future.