Gross burn is the operating cash that leaves the business during a period before realized cash inflows are considered.

Net burn is gross burn minus cash inflows actually received during the same period. Invoiced, recognized, or expected revenue is not automatically received cash.

How does burn connect to runway?

A headline runway estimate divides available cash by monthly net burn when net burn is positive. It is a planning signal, not a guarantee, and it remains sensitive to timing, obligations, and changing inputs.

Burn rate calculation guide

Burn rate is simple arithmetic. The useful part is knowing what belongs in the number.

Separate operating cash outflows from cash actually received, review more than one month, and keep a simple burn result in context before it enters a runway decision.

Put your numbers through a runway estimate →

Calculation map

Three related questions, three different numbers.

01
Operating cash outflows
→ Gross burn
02
Gross burn − realized cash inflows
→ Net burn
03
Available cash ÷ positive net burn
→ Headline runway

Conceptual calculation sequence. Timing, obligations, and changing inputs can make the operating decision more complex than the headline arithmetic.

What gross burn measures

Gross burn is the operating cash that left the business during the period. Payroll, tools, rent, contractors, and other operating costs belong in the review when they were paid or when the chosen cash method records them.

Gross burn shows the cost base before received cash offsets it. It does not say whether that spending was good, wasteful, or ready to cut.

What net burn measures

Net burn subtracts realized cash inflows from gross burn for the same period. Invoiced, recognized, contracted, or expected revenue does not reduce cash depletion until the cash is received under this calculation.

When inflows equal or exceed outflows, the business is not depleting cash in that simple monthly model. That does not remove timing risk or guarantee future cash generation.

A worked example

This example uses one month for clarity. A real review should compare several periods and retain notes about one-time movement.

Monthly operating cash outflows: $80,000
Realized cash inflows: $25,000
Gross burn: $80,000
Net burn: $55,000
Available cash: $550,000
Headline runway: 10.0 months

Illustrative example only. It is not a recommendation or a prediction.

04 and 05

What belongs in the inputs

Review the full cash movement

Use consistent categories and include the supported operating cash outflows that occurred. Keep one-time costs visible instead of hiding them inside a normalized month.

Use a trailing-period view

One month can be distorted by annual renewals, delayed receipts, equipment, or other timing. Compare three to six months before treating movement as a durable trend.

Common mistakes

Counting expected money as received

Pipeline, invoices, and signed work can matter to planning, but they do not become realized cash merely because payment is expected.

Mixing planned and recorded costs

A planned hire belongs in a scenario. It should not silently rewrite the actual period used to calculate current burn.

Treating one month as the trend

A single renewal or delayed receipt can move the number. Keep the reason beside the movement and review a trailing period.

Assuming lower burn is always better

Burn describes cash use, not the quality of the decision. Human judgment still determines whether the spending supports the plan.

Burn connects to runway

When net burn is positive, available cash divided by net burn gives a headline runway estimate. Change the input and the result changes. That makes the assumptions as important as the displayed month count.

See how runway calculation works →

Where simple arithmetic stops

Monthly burn can miss the dates when cash lands or leaves, obligations already spoken for, and differences between current facts and hypothetical plans. A runway estimate is not a cash forecast, accounting statement, or recommendation.