Burn Rate Calculator

Gross burn vs net burn

Gross burn is everything you pay out in a month – salaries, rent, software, contractors, marketing. Net burn subtracts cash coming in from customers. A company spending $80,000 a month with $30,000 of revenue has a gross burn of $80,000 and a net burn of $50,000. Investors focus on net burn for runway, but gross burn shows how much of the cost base you would need to cut if revenue fell.

How to calculate burn rate and runway

1. Use cash, not accounting profit: include payments for equipment and loan repayments, and exclude non-cash items such as depreciation and stock-based compensation.
2. Average over three months to smooth one-off payments such as annual software bills or tax.
3. Net burn = cash out − cash in. Or: (balance three months ago − balance today) ÷ 3.
4. Runway = cash today ÷ net burn.

Example: cash fell from $600,000 to $450,000 over three months. Net burn = $150,000 ÷ 3 = $50,000 a month, so $450,000 lasts nine months at that pace.

Runway when revenue is growing

Simple runway assumes nothing changes. If revenue grows, net burn shrinks each month and runway is longer. The scenario mode projects month by month: costs plus planned hires, minus revenue growing at your chosen rate, until cash runs out or the company reaches break-even. If break-even arrives before the cash runs out, the business is sometimes described as 'default alive'; if not, it needs new funding or cuts – 'default dead'.

Burn multiple

Burn multiple compares how much you burn with how much new annual recurring revenue (ARR) you add: net burn ÷ net new ARR over the same period. Burning $150,000 in a quarter to add $100,000 of ARR gives a burn multiple of 1.5. Lower means more efficient growth; it is most meaningful for subscription businesses.

How to extend your runway

• Cut or pause the costs that do not drive revenue or product progress – often software subscriptions, agencies and travel first.
• Delay hires and model each one in the scenario tool before committing.
• Collect cash faster: annual upfront billing, shorter payment terms, chasing overdue invoices.
• Negotiate payment terms with suppliers and landlords.
• Start fundraising well before you need it – raises commonly take several months – so plan to begin with plenty of runway left.

Runway projection example

A start-up has $450,000 in the bank, costs of $80,000 a month and $30,000 of monthly revenue growing 10% a month. Simple runway says 9 months ($450,000 ÷ $50,000). But because revenue grows, net burn falls each month: about $47,000 in month 2, $40,000 in month 4, $27,000 in month 7 and just over $2,000 in month 11. In month 12 revenue (about $85,600) exceeds costs, and the company becomes cash-flow positive with roughly $126,000 still in the bank. On these assumptions it is 'default alive' – but if growth were 5% a month instead, the cash would run out first. The scenario mode lets you test both.

What to include – and leave out – of burn

If you take on debt or raise a round, add the new cash to your balance rather than to revenue, so that burn still reflects the underlying business. Track gross burn, net burn and runway each month on the same basis so trends are meaningful.

Personal burn rate

The same idea works for individuals: your personal burn rate is your monthly spending, and your runway is savings ÷ (spending − income). Someone with $18,000 of savings, $3,000 of monthly expenses and $1,500 of part-time income has a net burn of $1,500 and about 12 months of runway – useful for planning a career break or a freelance start.