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Burn Rate

What is Burn Rate?

Your company’s burn rate describes how quickly it’s losing (burning) money. Many venture-backed startups need time and money to build their customer base and improve their products or services before becoming profitable. 

You’ll generally discuss your burn rate in terms of monthly figures, and it’s only relevant before your startup is profitable.

You can calculate your gross monthly burn by determining how much you spend in total each month. You can find this by comparing your cash balances from one month to the next. Your net burn rate is your monthly revenue minus monthly expenses and it shows much money you’re losing each month. A negative net burn rate can indicate you’re making money, but only if you exclude new funding during the period. 

You can divide how much cash you have by your net burn rate to calculate your runway — how long you’ll have until you run out of cash. Of course, these numbers can change with your expenses and revenue.

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