Burn rate is the single number that tells a startup founder, investor, or small-business owner how fast cash is leaving the bank. If you raise $2 million, spend $150,000 a month, and bring in $50,000, your net burn is $100,000 a month and your runway is roughly 20 months. Miss that calculation by even a month and you can be negotiating a distressed financing from a weaker position, or worse, shutting the company down.
This burn rate calculator separates gross burn (every dollar you spend) from net burn (what you actually lose each month after revenue), then divides your cash on hand by the net figure to give you runway in months. It also stress-tests what happens if tomorrow your revenue drops to zero — the scenario that kills most pre-profit startups.
How to Use
- Enter Cash on Hand — total cash, cash equivalents, and short-term investments currently in the company account. Include operating accounts, money-market funds, and any liquid Treasury bills you hold; exclude illiquid assets, equipment, and prepaid expenses.
- Enter Monthly Operating Expenses — the gross monthly cost of running the business: salaries and payroll taxes, rent, software subscriptions, marketing spend, contractors, cloud hosting, and office supplies. Use a three-month average rather than one exceptional month.
- Enter Monthly Revenue — all money coming in each month: recurring subscriptions, one-time contracts, services, and product sales. Pre-revenue companies leave this at zero.
- Read the result card. Gross Monthly Burn shows total spend. Net Monthly Burn subtracts revenue from spend. Cash Runway is cash on hand divided by net burn. Annual Net Burn projects twelve months forward for investor conversations. Runway If Revenue Drops to $0 is your worst-case buffer.
- Stress-test the output. Drag revenue to zero and watch how fast runway shrinks — that gap is the risk you are carrying. Drag expenses up by 10–20% to model hiring a key engineer or running a marketing campaign.
A runway of 18 months or more is widely considered safe; 12–18 months is a yellow flag; under 12 months means you should already be fundraising or cutting spend.
Gross Burn vs Net Burn: Why the Difference Matters
Founders often confuse these two, and investors notice.
- Gross burn is your total monthly cash outflow. It answers: "What does it cost to run this company?"
- Net burn is gross burn minus revenue. It answers: "How much cash do I actually lose each month?"
A company spending $200,000 a month with $120,000 in revenue has a gross burn of $200,000 but a net burn of only $80,000. With $1.2M in the bank, runway is 15 months on a net basis — not 6 months as the gross figure alone would suggest. But gross burn still matters: if that $120,000 of revenue comes from a single customer, losing it instantly pushes net burn back to $200,000 and cuts runway from 15 months to 6. The calculator's "Runway If Revenue Drops to $0" line exposes exactly this vulnerability.
The Burn Rate Formula
The math is deliberately simple:
Gross Monthly Burn = Monthly Operating Expenses
Net Monthly Burn = Monthly Operating Expenses − Monthly Revenue
Runway (months) = Cash on Hand ÷ Net Monthly Burn
Annual Net Burn = Net Monthly Burn × 12
Worked example: a SaaS startup has $500,000 in the bank, $80,000 in monthly expenses, and $20,000 in monthly revenue. Gross burn is $80,000. Net burn is $80,000 − $20,000 = $60,000. Runway is $500,000 ÷ $60,000 = 8.33 months. Annual net burn is $60,000 × 12 = $720,000. If revenue vanished tomorrow, the same $500,000 would last only $500,000 ÷ $80,000 = 6.25 months.
When net burn is zero or negative (expenses equal or exceed revenue), the company is break-even or cash-flow positive and runway is effectively unlimited — no external funding needed to survive, though growth may still require capital.
Examples
Example 1 — Early-stage SaaS startup. A company raised a $500,000 pre-seed round. Monthly run-rate: $80,000 in expenses, $20,000 in MRR. Gross burn is $80,000, net burn is $60,000. Runway is 8.3 months. The founder has roughly two quarters to either hit profitability, close a seed round, or cut burn. VCs typically want to see 18+ months of runway at the next round, so this company needs to either raise ~$600,000 or cut monthly spend to about $45,000 to reach 18 months on the same cash.
Example 2 — Pre-revenue hardware team. A hardware startup has $2,000,000 in the bank, $150,000 in monthly expenses, and no revenue yet. Gross burn equals net burn at $150,000. Runway is 13.3 months. With a product launch scheduled in 9 months, the team has a 4-month cushion after launch — tight but workable if launch converts. If the launch slips two months, runway drops to 11.3 months and fundraising urgency rises sharply.
Example 3 — Cash-flow-positive small business. A services firm has $300,000 in the bank, $40,000 in monthly expenses, and $55,000 in monthly revenue. Net burn is −$15,000 — the company makes $15,000 a month. Runway shows as unlimited. The calculator flags this as break-even or profitable; the question shifts from "how long do I survive" to "how do I reinvest $15,000 a month to grow."
Example 4 — Series B scale-up, large cash position. A growth-stage company holds $10,000,000 in cash, burns $500,000 a month gross against $100,000 of monthly revenue. Net burn is $400,000. Runway is 25 months — comfortable. Annual net burn is $4.8M, which is the figure investors compare against ARR growth to judge efficiency (the "burn multiple").
FAQ
What is a good burn rate for a startup?
There is no universal number, but the widely cited rule of thumb is that net burn should leave you with at least 12–18 months of runway after a funding round. Early-stage SaaS companies commonly run $50,000–$250,000 of monthly net burn; growth-stage companies can run much higher, but investors expect burn to scale slower than revenue. The ratio of net burn to net new ARR growth (the "burn multiple") should ideally be under 1.0.
How do I calculate monthly burn rate?
Add up all cash operating expenses for the month (salaries, rent, software, marketing, contractors, cloud, office costs). That is gross burn. Subtract total revenue collected in the same month. The result is net burn. Divide cash on hand by net burn to get runway in months. This calculator automates all three steps.
What is the difference between gross burn and net burn?
Gross burn is total monthly operating spend. Net burn is gross burn minus revenue. A company spending $200,000 a month with $120,000 in revenue has a $200,000 gross burn but only an $80,000 net burn. Investors focus on net burn because it reflects the real cash cost of running the company, but gross burn matters as a stress test: losing your largest customer can instantly convert net burn into gross burn.
How long will my startup cash last?
Divide your cash on hand by your monthly net burn. If you have $500,000 in the bank and burn $60,000 net per month, you last about 8.3 months. Add a buffer for unexpected delays: most fundraisers take 3–6 months, so starting a raise when runway dips below 6 months is high risk. Aim to start fundraising when runway hits 12–18 months.
Is a negative burn rate good or bad?
A negative net burn means revenue exceeds expenses — the company is cash-flow positive. That is good. It means runway is unlimited and you do not need external capital to survive. It does not automatically mean the business is scalable; some profitable small businesses simply cannot grow without reinvestment, but survival risk disappears.
Should I include salaries in burn rate?
Yes. Salaries, payroll taxes, benefits, and contractor payments are almost always the largest line item in startup burn. Excluding them understates burn dramatically. Include all cash operating expenses: payroll, rent, software subscriptions, cloud hosting, marketing spend, travel, legal, and office supplies. Do not include non-cash items like depreciation or stock-based compensation unless you are specifically modeling GAAP losses.
How can I reduce my burn rate?
The fastest levers are headcount (typically 60–80% of burn), office space, and software subscriptions. Marketing spend can usually be dialed down with a 1–2 month lag on growth. Before cutting, separate costs that drive revenue from costs that do not. A 10% across-the-board cut rarely beats a targeted cut of 20% to non-revenue functions.
Disclaimer
This burn rate calculator is provided for informational purposes only and does not constitute financial, accounting, legal, or investment advice. Runway estimates depend on the accuracy of the inputs you enter and assume expenses and revenue remain roughly constant; actual cash trajectories change monthly. Always consult a qualified accountant, CFO, or financial advisor before making spending, hiring, or fundraising decisions based on these figures.