You have high burn.
Is it good or bad?
You need context.
You need growth-adjusted evaluation.
Growth-adjusted burn. Context evaluation. Unit economics. Your judgment.
This guide shows you how.
High burn analysis. Growth context. Red flag identification. Your clarity.
Read this. Evaluate burn. Understand context.
Key Takeaways
- Calculate growth-adjusted burn—use Growth-Adjusted Burn Rate Calculator to see burn in context of growth
- Evaluate unit economics—high burn is fine when unit economics are positive and improving
- Check burn multiple—burn multiple shows efficiency of growth spending
- Watch for red flags—high burn without growth, negative unit economics, or declining efficiency
- Use context—evaluate burn rate relative to growth stage, market opportunity, and funding runway
Table of Contents
Why Context Matters
Context determines if burn is good or bad.
What happens without context:
- High burn is seen as always bad
- Good growth investments are cut
- Opportunities are missed
- Business growth is constrained
What happens with context:
- High burn is evaluated properly
- Good growth investments are protected
- Opportunities are captured
- Business growth is enabled
The reality: Context enables proper evaluation.
Calculating Growth-Adjusted Burn
Calculate growth-adjusted burn:
Use Growth-Adjusted Burn Rate Calculator
Calculate it:
- Use our Growth-Adjusted Burn Rate Calculator
- Enter monthly burn rate
- Enter monthly revenue growth
- See growth-adjusted burn rate
- Understand efficiency
Why it matters: Growth-adjusted burn shows efficiency.
Understand the Output
What the output shows:
- Burn rate relative to growth
- Efficiency of spending
- Whether burn is justified
- Growth trajectory
Why it matters: Understanding enables judgment.
Pro tip: Calculate growth-adjusted burn. Use our Growth-Adjusted Burn Rate Calculator for accurate calculation.
Evaluating Unit Economics
Evaluate unit economics:
Positive Unit Economics
What positive unit economics mean:
- Customer lifetime value exceeds acquisition cost
- Revenue per customer exceeds cost per customer
- Path to profitability is clear
- High burn is justified
Why it matters: Positive unit economics justify high burn.
Improving Unit Economics
What improving unit economics show:
- Unit economics getting better over time
- Path to profitability is strengthening
- Growth investments are working
- High burn is productive
Why it matters: Improving unit economics show progress.
Negative Unit Economics
What negative unit economics mean:
- Customer acquisition cost exceeds lifetime value
- Revenue per customer is less than cost
- Path to profitability is unclear
- High burn is dangerous
Why it matters: Negative unit economics are a red flag.
Pro tip: Evaluate unit economics. Positive and improving unit economics justify high burn, negative unit economics are a red flag.
Checking Burn Multiple
Check burn multiple:
What Burn Multiple Shows
What burn multiple is:
- Burn rate divided by net new revenue
- Efficiency of growth spending
- Lower is better
- Shows growth efficiency
Why it matters: Burn multiple shows efficiency.
Good Burn Multiple
What good burn multiple is:
- Below 2.0 for early stage
- Below 1.5 for growth stage
- Improving over time
- Sustainable
Why it matters: Good burn multiple shows efficiency.
Bad Burn Multiple
What bad burn multiple is:
- Above 3.0 consistently
- Getting worse over time
- Not improving
- Unsustainable
Why it matters: Bad burn multiple is a red flag.
Pro tip: Check burn multiple. Good burn multiple shows efficiency, bad burn multiple is a red flag. Use it to evaluate growth spending.
Watching Red Flags
Watch for red flags:
High Burn Without Growth
What this means:
- Spending is high
- Revenue is not growing
- Growth investments are not working
- Burn is wasteful
Why it matters: High burn without growth is dangerous.
Negative Unit Economics
What this means:
- Losing money on each customer
- No path to profitability
- Business model is broken
- Burn is unsustainable
Why it matters: Negative unit economics are a red flag.
Declining Efficiency
What this means:
- Burn multiple is getting worse
- Unit economics are declining
- Growth is slowing
- Burn is becoming inefficient
Why it matters: Declining efficiency is a warning sign.
Pro tip: Watch for red flags. High burn without growth, negative unit economics, declining efficiency. These are warning signs.
Using Context
Use context to evaluate burn:
Growth Stage
What stage to consider:
- Pre-revenue: High burn is expected
- Early stage: High burn for growth is normal
- Growth stage: Burn should be efficient
- Mature stage: Burn should be minimal
Why it matters: Stage determines acceptable burn.
Market Opportunity
What opportunity to consider:
- Large market: High burn for market capture is justified
- Small market: High burn is wasteful
- Growing market: High burn for growth makes sense
- Declining market: High burn is dangerous
Why it matters: Opportunity justifies burn level.
Funding Runway
What runway to consider:
- Long runway: More room for high burn
- Short runway: High burn is risky
- Adequate runway: High burn can be strategic
- Critical runway: High burn is dangerous
Why it matters: Runway determines risk tolerance.
Pro tip: Use context. Growth stage, market opportunity, funding runway. Evaluate burn rate in context of all factors.
Your Next Steps
Calculate growth-adjusted burn. Evaluate unit economics. Watch for red flags.
This Week:
- Review this guide
- Calculate growth-adjusted burn rate
- Evaluate unit economics
- Check burn multiple
This Month:
- Monitor growth-adjusted burn
- Track unit economics trends
- Watch for red flags
- Adjust as needed
Going Forward:
- Evaluate burn in context
- Use growth-adjusted metrics
- Monitor red flags
- Make informed decisions
Need help? Check out our Growth-Adjusted Burn Rate Calculator for growth-adjusted calculation, our Burn Rate Calculator for burn rate calculation, our Cash Runway Calculator for runway calculation, and our burn rate guide for comprehensive understanding.
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FAQs - Frequently Asked Questions About Growth-Adjusted Burn: When
What is growth-adjusted burn rate and how does it differ from regular burn rate?
Growth-adjusted burn rate evaluates your spending relative to how fast you are growing, giving context that raw burn rate alone cannot provide.
Learn More...
Regular burn rate simply measures how much cash you spend monthly, but tells you nothing about whether that spending is productive.
Growth-adjusted burn factors in monthly revenue growth to show whether your spending is efficiently driving growth or being wasted.
A company burning $100K per month with 30% monthly revenue growth is in a very different position than one burning $100K per month with 2% growth.
Use a Growth-Adjusted Burn Rate Calculator to see burn in context of growth efficiency.
What is burn multiple and what numbers indicate good versus bad efficiency?
Burn multiple is burn rate divided by net new revenue. Below 2.0 is good for early stage, below 1.5 for growth stage, and above 3.0 consistently is a red flag.
Learn More...
Burn multiple shows how efficiently you convert spending into new revenue. Lower is better.
For early-stage companies, a burn multiple below 2.0 indicates efficient growth spending.
Growth-stage companies should aim for below 1.5, showing the business is maturing toward sustainability.
A burn multiple consistently above 3.0 that is getting worse over time signals unsustainable spending and should trigger immediate review.
When is a high burn rate actually justified and acceptable?
High burn is justified when unit economics are positive, the burn multiple is improving, and you are capturing a large market opportunity with adequate runway.
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Positive unit economics mean customer lifetime value exceeds acquisition cost, so you are making money on each customer even if the overall business is not yet profitable.
Improving unit economics over time show that growth investments are working and the path to profitability is strengthening.
A large, growing market justifies higher burn for market capture, while a small or declining market makes high burn wasteful.
Adequate funding runway gives room for high burn to be strategic rather than reckless.
What are the key red flags that indicate my burn rate is a problem?
The three major red flags are high burn without revenue growth, negative unit economics, and declining growth efficiency over time.
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High burn without growth means spending is high but revenue is not increasing. Growth investments are not working and burn is wasteful.
Negative unit economics mean you are losing money on each customer with no clear path to profitability, making the business model fundamentally broken.
Declining efficiency shows the burn multiple getting worse, unit economics deteriorating, and growth slowing despite continued spending.
Any of these alone is concerning. Two or more together signal an urgent need to cut spending and restructure.
How does company growth stage affect what burn rate is acceptable?
Pre-revenue and early-stage companies can justify higher burn, growth-stage companies need efficient burn, and mature companies should have minimal burn.
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Pre-revenue stage: High burn is expected because you are investing in product development before generating income.
Early stage: High burn for customer acquisition and growth is normal as long as unit economics are positive or improving.
Growth stage: Burn should be efficient with a declining burn multiple, showing the business is scaling sustainably.
Mature stage: Burn should be minimal, with the business generating enough revenue to cover expenses and produce profit.
How should I evaluate burn rate in the context of my funding runway?
Longer runway gives more room for strategic high burn, while short runway makes high burn dangerously risky.
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With long runway (18+ months of cash), you have room to invest aggressively in growth even at high burn rates.
With adequate runway (12-18 months), high burn can be strategic but requires close monitoring and contingency planning.
With short runway (6-12 months), high burn is risky and should be reduced unless you are confident in imminent funding or profitability.
At critical runway (under 6 months), high burn is dangerous regardless of growth metrics. Survival takes priority over growth.
Sources & Additional Information
This guide provides general information about growth-adjusted burn rate evaluation. Your specific situation may require different considerations.
For growth-adjusted burn rate calculation, see our Growth-Adjusted Burn Rate Calculator.
For burn rate calculation, see our Burn Rate Calculator.
For cash runway calculation, see our Cash Runway Calculator.
Consult with professionals for advice specific to your situation.
