Burn Rate: What You Really Spend Each Month
Burn rate measures how quickly a company is using cash. The key split is gross burn, your total monthly cash outflow, versus net burn, which subtracts the cash customers pay you but not new investment or loans. Burn rate is also what you use to estimate runway, so getting it right matters.
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- Gross burn is total monthly cash outflow. Net burn is that outflow minus cash from customers and other operations.
- Use a three-month average of net burn so one lumpy month doesn't distort it.
- Burn rate is the input that determines runway.
- Recalculate burn every month and read it against your cash balance.
Gross burn and net burn
Burn rate puts a number on how fast cash leaves the business, and it comes in two forms.
Gross burn: Total monthly cash outflow, regardless of any money coming in.
Net burn: Monthly cash out minus cash in from customers and other operations, leaving out new investment or loans. It is the rate your bank balance falls.
Missing changes in burn timing
| Feature | Startup Suite | A spreadsheet |
|---|---|---|
| Monitoring | Built to show burn next to cash balance and runway | Burn can be calculated manually |
| Timing | Designed for month-by-month burn, so a change shows in the month it happens | Easy to miss timing changes |
- Monitoring
- Built to show burn next to cash balance and runway
- Timing
- Designed for month-by-month burn, so a change shows in the month it happens
- Monitoring
- Burn can be calculated manually
- Timing
- Easy to miss timing changes
Explaining burn versus tracking it monthly
An advisor can explain why burn rose last quarter. Catching the rise as it happens means updating the figure yourself every month.
Tying burn to runway in Startup Suite
Startup Suite is built to show burn next to your cash balance and runway. Burn becomes useful when you read it against cash in the bank, because together they give you the month the money runs out.
Forecast Engine: burn tied to runway
- Built to show gross and net burn next to your cash balance.
- Designed to show how a spending change moves the runway.
- Meant to flag burn creep before it shortens your timeline.
Working out a $26,000 net burn
If you pay out $45,000 a month (gross burn) and collect $19,000 from customers, net burn is 45,000 minus 19,000, which is $26,000 a month. With $312,000 in the bank, runway is 312,000 divided by 26,000, or 12 months, assuming burn stays flat.
What you spend each month
Frequently asked questions
Is burn rate the same as runway?
No. Burn rate is the monthly cash loss. Runway is how long your cash lasts at that burn.
Should I track gross or net burn?
Both. Gross burn shows total spend, and net burn shows the real rate your balance falls.
How often should I check burn?
Every month once the books close, and again after any hire or large contract. Burn moves with hiring, collections and one-off costs.
Still have questions? Talk to the team.
