Burn rate is the speed at which your business spends cash each month before becoming profitable. Gross burn is total monthly spending. Net burn subtracts any revenue, showing how fast your cash reserves are shrinking.

How do you calculate runway from burn rate?

Divide your current cash balance by your monthly net burn rate. If you have $120,000 in the bank and burn $10,000 per month net, your runway is 12 months.

What is a healthy burn rate for a startup?

There is no single number, but most advisors recommend maintaining at least 12-18 months of runway. If your runway drops below 6 months, it is time to cut costs or raise capital.

What is the difference between gross burn and net burn?

Gross burn is your total monthly expenses, regardless of income. Net burn subtracts revenue from expenses. A company spending $50,000/month with $20,000 in revenue has a gross burn of $50,000 and a net burn of $30,000.

Burn rate is the monthly rate at which your business spends cash beyond what it brings in. Divide your total cash reserves by your monthly burn rate to calculate runway, the number of months before you run out of money. A burn rate above 15-20% of monthly revenue is a warning sign for most small businesses outside of an intentional growth phase.

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