Burn Rate Calculator Formula
Understand the math behind the burn rate calculator. Each variable explained with a worked example.
Formulas Used
Gross Burn Rate (monthly)
gross_burn = monthly_expensesNet Burn Rate (monthly)
net_burn = monthly_expenses - monthly_revenueCash Runway
runway_months = (monthly_expenses - monthly_revenue) > 0 ? cash_balance / (monthly_expenses - monthly_revenue) : 0Variables
| Variable | Description | Default |
|---|---|---|
cash_balance | Current Cash Balance(USD) | 500000 |
monthly_expenses | Monthly Expenses(USD) | 80000 |
monthly_revenue | Monthly Revenue(USD) | 30000 |
How It Works
How to Calculate Burn Rate and Runway
Formula
Gross Burn = Monthly Expenses Net Burn = Monthly Expenses - Monthly Revenue Runway = Cash Balance / Net Burn
Burn rate is how fast a startup spends its cash reserves. Gross burn counts all spending. Net burn subtracts revenue, giving the actual cash outflow. Runway is the number of months until the cash runs out at the current net burn rate. Startups typically aim to maintain at least 12-18 months of runway to give themselves time to reach profitability or raise the next round.
Worked Example
A startup has $500,000 in the bank, spends $80,000/month, and earns $30,000/month in revenue.
- 01Gross Burn = $80,000/month
- 02Net Burn = $80,000 - $30,000 = $50,000/month
- 03Runway = $500,000 / $50,000 = 10.0 months
Frequently Asked Questions
How much runway should a startup have?
12-18 months is the standard target. Fundraising typically takes 3-6 months, so starting at 6 months of runway puts you in a desperate position. Begin fundraising or adjusting spend when runway drops below 9-12 months.
How do I reduce burn rate?
Audit all expenses for necessity. Common cuts include office space (go remote), non-critical hires, paid tools with free alternatives, and marketing spend with unclear ROI. Focus on extending runway while preserving growth-critical activities.
Learn More
Guide
Cash Flow Analysis Guide
Learn how to analyze cash flow for your business. Understand operating, investing, and financing cash flows, and why profitable companies can still run out of cash.
Ready to run the numbers?
Open Burn Rate Calculator