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.
FAQs - Frequently Asked Questions About Burn Rate Blindness: Spending Money Faster Than Revenue Comes In
How do I calculate my business burn rate?
Burn Rate = Total Monthly Expenses minus Monthly Revenue. If the result is positive, you're spending faster than you earn.
Learn More...
Add up all monthly expenses including fixed costs (rent, salaries), variable costs (materials, commissions), and one-time costs averaged monthly.
Add up all monthly revenue from product sales, service revenue, subscriptions, and other income sources.
Subtract revenue from expenses. For example, $50,000 in expenses minus $30,000 in revenue equals a $20,000 per month burn rate.
Use the Burn Rate Calculator to automate this calculation and see monthly burn rate, annual burn rate, and runway projections.
What is runway and how do I calculate how long my cash will last?
Runway is your current cash divided by your monthly burn rate. For example, $200,000 in cash divided by $20,000 burn rate equals 10 months of runway.
Learn More...
Runway tells you exactly how many months your business can survive at the current spending rate before running out of cash.
Critical runway (less than 3 months) requires immediate emergency action. Warning runway (3-6 months) means you need to act soon.
Adequate runway (6-12 months) needs close monitoring, while strong runway (12+ months) lets you focus on growth while maintaining discipline.
Use the Cash Runway Calculator to find your exact runway and plan accordingly.
What are the four strategies for controlling burn rate?
The four strategies are reducing expenses, increasing revenue, monitoring monthly, and planning for growth.
Learn More...
Reduce expenses by eliminating unnecessary costs, negotiating better terms, optimizing operations, and reducing overhead.
Increase revenue by improving sales, raising prices, adding revenue streams, and accelerating growth to offset the burn.
Monitor monthly by calculating burn rate regularly, tracking trends, comparing to budget, and adjusting as needed.
Plan for growth by modeling different growth rates, calculating burn rate at scale, and using the Growth Adjusted Burn Rate Calculator to evaluate burn in context.
What is a growth-adjusted burn rate and when is high burn acceptable?
Growth-adjusted burn rate considers revenue growth alongside spending. High burn is acceptable when revenue growth justifies the investment.
Learn More...
A business burning $50,000 per month but growing revenue at 30% month-over-month is in a very different position than one with flat revenue.
Use the Growth Adjusted Burn Rate Calculator to evaluate whether your burn rate is appropriate given your revenue trajectory.
High burn is acceptable in pre-revenue or growth stages if there's a clear path to revenue catching up with expenses.
The key question is whether your spending is strategically driving the growth that will eventually exceed expenses.
Why does burn rate blindness kill businesses and how common is it?
Most businesses don't track burn rate, they spend and hope revenue catches up, which is why burn rate blindness contributes to 90% of startup failures.
Learn More...
Without burn rate visibility, you don't know how fast you're spending, when you'll run out of cash, or how to plan for the future.
Businesses operate in the dark, making decisions without understanding their financial trajectory.
With burn rate visibility, you know exactly where you stand, can plan strategically, and can prevent failure before it's too late.
The fix is simple math: calculate burn rate monthly, monitor trends, and take action when the numbers demand it.
What tools should I use to track and manage my burn rate?
Use the Burn Rate Calculator for monthly burn, Cash Runway Calculator for runway, Recurring Expense Analyzer for cost reduction, and Growth Adjusted Burn Rate Calculator for context.
Learn More...
The Burn Rate Calculator shows your monthly and annual burn rate plus runway calculations.
The Cash Runway Calculator tells you exactly how long your current cash will last at your spending rate.
The Recurring Expense Analyzer helps identify cost reduction opportunities by analyzing your recurring expenses.
The Growth Adjusted Burn Rate Calculator evaluates whether your burn rate is appropriate given your revenue growth trajectory.
Additional planning tools include the Cash Flow Forecast Calculator, Funding Need Calculator, and Profitability Timeline Calculator.
