Burn Rate
The rate at which a company spends its cash reserves, typically measured as a monthly figure.
The burn composition chart shows exactly what drives your monthly spending.
What is Burn Rate?
Burn rate is how fast your company is spending money. It's usually expressed as a monthly number — "we're burning $80,000 per month."
There are two types: gross burn (total spending before revenue) and net burn (total spending minus revenue). Most investors and board members care about net burn because it reflects your actual cash depletion rate.
Burn rate is the denominator in your runway equation. Controlling it is one of the few levers a founder has direct control over.
Why it matters
Burn rate is the speed at which you're approaching zero. A founder who knows their burn rate can make proactive decisions — cutting a tool before it auto-renews, delaying a hire by one month, or negotiating a longer payment cycle with a vendor.
The danger is when burn rate creeps up gradually. One new hire here, one upgraded tool there — each individually justified, but collectively they can cut your runway by months without anyone noticing.
Formula
Gross Burn Rate = Total Monthly Operating Expenses Net Burn Rate = Total Monthly Expenses - Total Monthly Revenue
Example
A company spends $70,000 on payroll, $8,000 on tools, and $12,000 on other commitments. Gross burn = $90,000. If monthly revenue is $30,000, net burn = $60,000.
How RunwayCal helps
RunwayCal breaks down your burn rate into its components — payroll, tools, and commitments — so you can see exactly what drives your spending. The burn composition chart shows you where every dollar goes.
Common mistakes
- 1Confusing gross burn and net burn when reporting to investors
- 2Not accounting for annual or quarterly expenses in the monthly average
- 3Ignoring upcoming cost increases from planned hires or tool upgrades
See exactly where your money goes
RunwayCal shows your burn rate broken down by payroll, tools, and commitments — with trend tracking and anomaly alerts.
Track your burn rate → Start free