Burn Rate Calculator
Calculate your company's monthly cash burn and runway
How to Use This Tool
Enter your monthly operating expenses and current cash balance. If you have monthly revenue, select "Net Burn" to account for revenue offsetting expenses. Optionally, enter a projection period to see total expenses over that timeframe. Click Calculate to see your burn rate, runway, and a visual indicator of your financial health.
Formula and Logic
Gross Burn Rate: Monthly Operating Expenses.
Net Burn Rate: Monthly Operating Expenses minus Monthly Revenue (if revenue is provided). If revenue exceeds expenses, net burn becomes negative, indicating positive cash flow.
Runway (months): Current Cash Balance divided by Net Burn Rate (if Net Burn > 0). If Net Burn <= 0, runway is infinite (or until revenue/expenses change).
Total Expenses (over projection period): Burn Rate multiplied by the projection period (in months), but not exceeding the runway. If the projection period is longer than the runway, the total expenses are only until the cash runs out.
Practical Notes
For startups and small businesses, a burn rate of less than 12 months runway is considered risky. Aim for at least 18-24 months of runway to secure funding comfortably. Monitor your burn rate monthly and adjust spending based on revenue growth. In e-commerce, consider seasonality: your burn rate might fluctuate, so use average monthly figures. Also, remember that operating expenses should include all fixed and variable costs, such as salaries, rent, marketing, and inventory. If you're a trader, include cost of goods sold and transaction fees. Keep a buffer for unexpected expenses.
Why This Tool Is Useful
Understanding your burn rate is critical for survival and growth. It helps you plan fundraising timelines, evaluate spending efficiency, and avoid running out of cash. This calculator provides a clear breakdown and visual indicator, making it easy to communicate financial health to stakeholders. Use it regularly to stay on top of your cash flow and make data-driven decisions.
Frequently Asked Questions
What is the difference between gross and net burn rate?
Gross burn rate is the total monthly expenses without considering revenue. Net burn rate subtracts monthly revenue from expenses, giving a more accurate picture of cash outflow. Net burn is typically used when the business has consistent revenue.
How long should my runway be?
Most investors and advisors recommend having at least 12-18 months of runway. For early-stage startups, 24 months is ideal to allow time for product development and market penetration without immediate fundraising pressure.
What if my net burn is negative?
A negative net burn means your revenue exceeds your expenses, resulting in positive cash flow. In this case, your runway is effectively infinite (until conditions change) because you are adding to your cash balance each month.
Additional Guidance
Regularly update your burn rate calculations with actual figures to track trends. If your runway is decreasing, consider cost-cutting or revenue-boosting strategies. Use this tool in conjunction with your financial statements for a comprehensive view. Remember that burn rate is a snapshot; it doesn't account for future large expenses or one-time investments. Plan accordingly.