About Burn Rate Calculator
The Burn Rate Calculator is a crucial tool for startups and growing businesses to monitor their cash flow and plan their runway. Understanding your burn rate helps make informed decisions about fundraising, growth, and financial sustainability.
Understanding Burn Rate and Runway
Burn rate and runway are critical metrics for startup financial planning:
- Burn Rate: The rate at which a company spends its cash reserves on operating expenses minus revenue
- Cash Runway: How long your current cash reserves will last at your current burn rate
Calculation Formulas
Net Burn Rate:
Monthly Expenses - Monthly Revenue
Cash Runway (months):
Current Cash Balance ÷ Monthly Burn Rate
Key Burn Rate Metrics
Gross Burn Rate
Total monthly operating expenses before considering any revenue. Shows the total cash outflow.
Net Burn Rate
Monthly cash burn after accounting for revenue. Shows how quickly you're actually depleting cash reserves.
Cash Runway
Time remaining until cash reserves are depleted at current burn rate. Critical for fundraising timing.
Break-even Point
Point at which revenue equals expenses and burn rate becomes zero. Key milestone for sustainability.
Using Burn Rate for Business Planning
- Fundraising Timing: Plan fundraising rounds based on runway
- Growth Decisions: Balance growth investments with cash preservation
- Cost Management: Identify areas for potential cost reduction
- Revenue Targets: Set revenue goals to extend runway
- Resource Allocation: Make informed decisions about hiring and expansion
Best Practices
- Monitor burn rate monthly to track changes and trends
- Maintain at least 12-18 months of runway when possible
- Consider seasonal variations in revenue and expenses
- Include a buffer for unexpected costs or revenue shortfalls
- Review and adjust spending before runway becomes critical
Regular monitoring of burn rate and runway is essential for startup survival and growth. These metrics help founders make informed decisions about spending, fundraising, and business development strategies.
