You’re spending money.
Revenue is coming in. But you’re spending faster than it arrives.
You don’t realize it. You don’t track it. You don’t see the problem.
Burn rate blindness kills businesses.
Spending faster than revenue means you’ll run out of cash. You’ll hit a wall. You’ll fail.
This guide shows you how to see your burn rate.
Calculate burn rate. Understand runway. Control spending.
Key Takeaways
- Burn rate is how fast you spend money—calculate it monthly to see if spending exceeds revenue
- Runway is how long your cash will last—use Burn Rate Calculator and Cash Runway Calculator to find it
- Negative burn rate means spending exceeds revenue—this is unsustainable and leads to business failure
- Control burn rate by tracking expenses, reducing costs, increasing revenue, and monitoring runway monthly
- Growth-adjusted burn rate considers revenue growth—high burn is acceptable if revenue growth justifies it
Table of Contents
Why Burn Rate Matters
Burn rate determines survival.
Without burn rate visibility:
- You don’t know how fast you’re spending
- You don’t know when you’ll run out of cash
- You can’t plan for the future
- You risk business failure
- You operate in the dark
With burn rate visibility:
- You know exactly how fast you’re spending
- You know when you’ll run out of cash
- You can plan strategically
- You can prevent failure
- You operate with clarity
The reality: Burn rate blindness kills 90% of startups that fail.
Most businesses don’t track burn rate. They spend. They hope revenue catches up.
The truth: Burn rate is simple math. Calculate it. Monitor it. Control it.
Understanding Burn Rate
Burn rate is how fast you spend money.
The formula:
- Burn Rate = Total Monthly Expenses - Monthly Revenue
If burn rate is positive:
- You’re spending more than you earn
- You’re losing money each month
- Cash is decreasing
- Runway is shrinking
If burn rate is negative:
- You’re earning more than you spend
- You’re making money each month
- Cash is increasing
- Runway is growing
The question: Is your burn rate sustainable?
The answer: Calculate it. Compare to revenue. Plan accordingly.
Calculating Burn Rate
Calculate burn rate monthly.
Step 1: Calculate Total Monthly Expenses
Add all monthly expenses.
Expense categories:
- Fixed costs (rent, salaries, etc.)
- Variable costs (materials, commissions, etc.)
- One-time costs (averaged monthly)
- All operating expenses
Total: Your monthly expense total.
Step 2: Calculate Monthly Revenue
Add all monthly revenue.
Revenue sources:
- Product sales
- Service revenue
- Subscription revenue
- Other income
Total: Your monthly revenue total.
Step 3: Calculate Burn Rate
Subtract revenue from expenses.
The formula:
- Burn Rate = Monthly Expenses - Monthly Revenue
Example:
- Monthly expenses: $50,000
- Monthly revenue: $30,000
- Burn Rate = $50,000 - $30,000 = $20,000/month
You’re burning $20,000 per month.
Step 4: Use Calculator
Use the Burn Rate Calculator to calculate burn rate automatically.
The calculator shows:
- Monthly burn rate
- Annual burn rate
- Runway calculation
- Growth projections
Understanding Runway
Runway is how long your cash will last.
The formula:
- Runway = Current Cash / Monthly Burn Rate
Example:
- Current cash: $200,000
- Monthly burn rate: $20,000
- Runway = $200,000 / $20,000 = 10 months
You have 10 months of runway.
Runway Categories
Critical (less than 3 months):
- Immediate action required
- High failure risk
- Emergency measures needed
Warning (3-6 months):
- Action needed soon
- Moderate failure risk
- Plan for fundraising or cost reduction
Adequate (6-12 months):
- Monitor closely
- Plan for growth or fundraising
- Maintain current practices
Strong (12+ months):
- Good position
- Focus on growth
- Maintain discipline
Calculate runway: Use the Cash Runway Calculator to find your runway.
Controlling Burn Rate
Control burn rate systematically.
Strategy 1: Reduce Expenses
Reduce expenses to lower burn rate.
Expense reduction:
- Eliminate unnecessary expenses
- Negotiate better terms
- Optimize operations
- Reduce overhead
Impact: Lower burn rate. Longer runway.
Use the Recurring Expense Analyzer to identify cost reduction opportunities.
Strategy 2: Increase Revenue
Increase revenue to offset burn rate.
Revenue increase:
- Improve sales
- Raise prices
- Add revenue streams
- Accelerate growth
Impact: Lower or negative burn rate. Longer runway.
Strategy 3: Monitor Monthly
Monitor burn rate monthly to catch problems early.
Monthly monitoring:
- Calculate burn rate
- Track trends
- Compare to budget
- Adjust as needed
Result: Always know your burn rate.
Strategy 4: Plan for Growth
Plan burn rate for growth scenarios.
Growth planning:
- Model different growth rates
- Calculate burn rate at scale
- Plan capital needs
- Set growth targets
Use the Growth Adjusted Burn Rate Calculator to evaluate burn in context of growth.
Burn Rate Framework
Use this framework to manage burn rate.
Step 1: Calculate Current Burn Rate
Calculate burn rate monthly.
Calculate:
- Total monthly expenses
- Total monthly revenue
- Burn rate (expenses - revenue)
Use the Burn Rate Calculator.
Step 2: Calculate Runway
Calculate how long cash will last.
Calculate:
- Current cash balance
- Monthly burn rate
- Runway (cash / burn rate)
Use the Cash Runway Calculator.
Step 3: Compare to Benchmarks
Compare burn rate to industry benchmarks.
Benchmarks:
- Pre-revenue: Focus on extending runway
- Early revenue: Burn should decrease as revenue grows
- Growth stage: Growth-adjusted burn is acceptable
If burn rate is too high, take action.
Step 4: Set Burn Rate Targets
Set targets for burn rate reduction.
Targets:
- Reduce burn by X% per month
- Extend runway to Y months
- Achieve break-even by Z date
Track progress monthly.
Step 5: Take Action
Take action to control burn rate.
Actions:
- Reduce expenses
- Increase revenue
- Secure funding
- Adjust strategy
Monitor results.
Your Next Steps
Stop spending blindly. Start tracking burn rate.
This week:
- Calculate your burn rate using the Burn Rate Calculator
- Calculate your runway using the Cash Runway Calculator
- Compare to benchmarks
- Identify top expense reduction opportunities
This month:
- Reduce expenses by 10-20%
- Increase revenue if possible
- Monitor burn rate weekly
- Plan for runway extension
Ongoing:
- Calculate burn rate monthly
- Track runway trends
- Adjust spending based on data
- Plan for growth and funding
Remember: Burn rate determines survival. Calculate it. Monitor it. Control it.
Key Takeaways Recap
- Burn rate is how fast you spend money—calculate it monthly to see if spending exceeds revenue
- Runway is how long your cash will last—use Burn Rate Calculator and Cash Runway Calculator to find it
- Negative burn rate means spending exceeds revenue—this is unsustainable and leads to business failure
- Control burn rate by tracking expenses, reducing costs, increasing revenue, and monitoring runway monthly
- Growth-adjusted burn rate considers revenue growth—high burn is acceptable if revenue growth justifies it
Related Tools and Resources
Burn Rate Calculators
- Burn Rate Calculator - Calculate monthly burn rate
- Monthly Burn Rate Calculator - Track monthly spending
- Cash Runway Calculator - Calculate how long cash will last
- Growth Adjusted Burn Rate Calculator - Evaluate burn in context of growth
Financial Planning Tools
- Cash Flow Forecast Calculator - Project cash flow
- Funding Need Calculator - Determine capital requirements
- Profitability Timeline Calculator - Project profitability
Need help calculating and controlling your burn rate? Contact Business Initiative for burn rate analysis and strategic guidance.
