You’re spending money.
You don’t know how fast.
You need to know your burn rate.
You need survival awareness.
Burn rate. Cash consumption. Survival metric. Your reality.
This guide shows you how.
Burn rate calculation. Interpretation. Understanding. Your survival.
Read this. Calculate burn rate. Understand survival.
Key Takeaways
- Calculate burn rate—use Burn Rate Calculator to see how much cash you're spending monthly
- Understand gross vs. net burn—gross burn is total expenses, net burn accounts for revenue
- Calculate runway—use Cash Runway Calculator to see how many months you have left
- Monitor regularly—track burn rate monthly to catch changes early
- Take action—use burn rate to make decisions about spending, fundraising, and growth
Table of Contents
Why Burn Rate Matters
Burn rate shows survival time.
What happens without knowing burn rate:
- Cash runs out unexpectedly
- Decisions are made too late
- Opportunities are missed
- Business fails
What happens with knowing burn rate:
- Cash needs are anticipated
- Decisions are made proactively
- Opportunities are captured
- Business survives
The reality: Burn rate enables survival.
Calculating Burn Rate
Calculate your burn rate:
Use Burn Rate Calculator
Calculate it:
- Use our Burn Rate Calculator
- Enter starting capital
- Enter monthly expenses
- Enter monthly revenue (if any)
- See burn rate and runway
Why it matters: Accurate calculation shows cash consumption.
Monthly Burn Rate
What to calculate:
- Use our Monthly Burn Rate Calculator
- Enter total monthly expenses
- Enter monthly revenue
- See gross and net burn rates
Why it matters: Monthly burn rate shows cash outflow.
Pro tip: Calculate burn rate. Use our Burn Rate Calculator or Monthly Burn Rate Calculator for accurate calculation.
Gross vs. Net Burn
Understand the difference:
Gross Burn Rate
What it is:
- Total monthly expenses
- All cash going out
- Before revenue
- Shows total spending
Why it matters: Gross burn shows total cash consumption.
Net Burn Rate
What it is:
- Monthly expenses minus revenue
- Actual cash loss
- After revenue
- Shows net cash consumption
Why it matters: Net burn shows actual cash depletion.
Which to Use
When to use gross:
- Pre-revenue businesses
- Understanding total spending
- Planning expenses
When to use net:
- Revenue-generating businesses
- Understanding actual cash loss
- Calculating runway
Pro tip: Understand both. Gross burn for total spending, net burn for actual cash loss. Use the appropriate metric for your situation.
Calculating Runway
Calculate your runway:
Use Cash Runway Calculator
Calculate it:
- Use our Cash Runway Calculator
- Enter current cash balance
- Enter monthly burn rate
- See months remaining
Why it matters: Runway shows time until cash runs out.
Use Runway Calculator
Calculate it:
- Use our Runway Calculator
- Enter cash and burn rate
- See runway and scenarios
- Model different situations
Why it matters: Runway enables planning.
Pro tip: Calculate runway. Use our Cash Runway Calculator or Runway Calculator for accurate calculation. See our cash runway roadmap guide for comprehensive planning.
Monitoring Regularly
Monitor burn rate regularly:
Monthly Tracking
What to track monthly:
- Actual burn rate
- Comparison to previous month
- Trends over time
- Changes in spending
Why it matters: Regular tracking catches problems early.
Compare to Budget
What to compare:
- Actual burn vs. budgeted burn
- Variances and reasons
- Areas of concern
- Opportunities for improvement
Why it matters: Comparison shows accuracy and issues.
Watch for Changes
What changes to watch:
- Sudden increases
- Gradual increases
- Seasonal patterns
- One-time spikes
Why it matters: Early detection enables action.
Pro tip: Monitor regularly. Monthly tracking, compare to budget, watch for changes. See our monthly financial review guide for routine.
Taking Action
Take action based on burn rate:
When Burn Is Too High
What actions to take:
- Reduce expenses
- Increase revenue
- Extend runway
- Raise capital
Why it matters: Action prevents failure.
When Burn Is Acceptable
What actions to take:
- Maintain discipline
- Monitor closely
- Plan for growth
- Build reserves
Why it matters: Discipline maintains sustainability.
Use for Decisions
What decisions to use for:
- Hiring decisions
- Investment decisions
- Growth decisions
- Fundraising timing
Why it matters: Decisions improve outcomes.
Pro tip: Take action. Use burn rate for decisions, adjust when needed, maintain discipline. See our burn rate reduction sprint guide for action plan.
Your Next Steps
Calculate burn rate. Monitor regularly. Take action.
This Week:
- Review this guide
- Calculate your current burn rate
- Calculate your current runway
- Set up monthly tracking
This Month:
- Track burn rate monthly
- Compare to budget
- Identify any concerns
- Take action as needed
Going Forward:
- Monitor burn rate regularly
- Use for decisions
- Adjust spending as needed
- Maintain survival awareness
Need help? Check out our Burn Rate Calculator for burn rate calculation, our Monthly Burn Rate Calculator for monthly tracking, our Cash Runway Calculator for runway calculation, our Runway Calculator for comprehensive analysis, and our cash runway roadmap guide for comprehensive planning.
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FAQs - Frequently Asked Questions About Know Your Burn: A Simple Guide to Calculating and Interpreting Burn Rate
What is burn rate, and why is it critical for business survival?
Burn rate is how fast your business spends cash each month. Knowing it tells you how long you can survive before running out of money.
Learn More...
Burn rate measures your monthly cash consumption. Without tracking it, cash can run out unexpectedly, forcing sudden shutdowns or desperate decisions.
Knowing your burn rate lets you anticipate cash needs, make proactive decisions about spending and fundraising, and capture opportunities before they disappear.
It's the single most important survival metric for any startup or growing business.
What is the difference between gross burn rate and net burn rate?
Gross burn is your total monthly expenses before revenue. Net burn is expenses minus revenue—your actual monthly cash loss.
Learn More...
Gross burn rate counts all cash going out the door each month, regardless of income. It shows your total spending level.
Net burn rate subtracts your monthly revenue from expenses, revealing your actual cash depletion rate.
Use gross burn for pre-revenue businesses or to understand total spending. Use net burn for revenue-generating businesses to calculate how long your cash will actually last.
How do I calculate my startup's cash runway from burn rate?
Divide your current cash balance by your monthly net burn rate to see how many months of runway you have left.
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The formula is simple: Cash Runway = Current Cash Balance ÷ Monthly Net Burn Rate.
For example, if you have $120,000 in the bank and burn $15,000 net per month, you have 8 months of runway.
Use a cash runway calculator to model different scenarios—what happens if revenue increases, if you cut costs, or if you raise capital.
Runway gives you a concrete timeline to work with, helping you plan fundraising, hiring, and growth moves before cash runs out.
How often should I track my burn rate, and what should I compare it against?
Track burn rate monthly, compare it to your budget, and watch for sudden increases, gradual creep, or seasonal patterns.
Learn More...
Monthly tracking is the minimum—it lets you catch problems early before they become crises.
Compare your actual burn against your budgeted burn each month. Investigate any variances to understand whether they're one-time events or ongoing trends.
Watch for sudden spikes (a new hire or unexpected expense), gradual increases (scope creep in spending), and seasonal patterns that affect cash flow.
Set up a monthly financial review routine so burn rate monitoring becomes automatic rather than reactive.
What actions should I take if my burn rate is too high?
Reduce expenses, increase revenue, extend your runway, or raise additional capital—ideally a combination of these.
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Start with the fastest lever: cut non-essential expenses immediately. This buys time without requiring external help.
Then work on increasing revenue through pricing adjustments, new sales channels, or upselling existing customers.
If burn is still too high, explore fundraising or debt financing to extend your runway while you fix the underlying economics.
Use burn rate data to inform every major decision—hiring, new tools, marketing spend—so spending stays aligned with survival and growth needs.
When should I use gross burn rate versus net burn rate for decision-making?
Use gross burn when planning total expenses or for pre-revenue businesses. Use net burn when calculating actual runway and making survival decisions.
Learn More...
Gross burn is most useful when you're pre-revenue or want to understand your total cost structure regardless of income.
Net burn is the survival metric—it tells you how fast your cash is actually declining and drives runway calculations.
For fundraising conversations, investors want to see both: gross burn shows your spending discipline, net burn shows how close you are to sustainability.
Track both numbers monthly so you can make informed decisions about both spending efficiency and overall sustainability.
Sources & Additional Information
This guide provides general information about burn rate calculation and interpretation. Your specific situation may require different considerations.
For burn rate calculation, see our Burn Rate Calculator.
For monthly burn rate calculation, see our Monthly Burn Rate Calculator.
For cash runway calculation, see our Cash Runway Calculator.
For runway analysis, see our Runway Calculator.
Consult with professionals for advice specific to your situation.
