What This Calculator Does
Burn rate measures how quickly a company spends its cash reserves. It is the single most watched metric for startups and any business operating at a loss. This calculator computes both gross burn (total monthly expenses) and net burn (expenses minus revenue), then shows your runway: how many months until the cash runs out. It also projects your cash balance month by month so you can see the trajectory.
Investors care deeply about burn rate because it determines how urgently a company needs to reach profitability or raise more capital. A startup burning $50,000 per month with $500,000 in the bank has 10 months of runway. If they cannot raise another round or reach profitability in that time, they shut down. Reducing burn by $10,000 per month extends the runway to 12.5 months, buying two and a half extra months to figure things out.
To calculate your runway directly with more options, use our Runway Calculator. For a full picture of your cash flow including investing and financing activities, see our Cash Flow Calculator.
Inputs Required
- Current Cash Balance: Total cash and cash equivalents in the bank
- Monthly Revenue: Recurring revenue collected each month
- Monthly Expenses: All cash outflows including salaries, rent, software, marketing, and operations
Outputs Provided
- Gross Burn Rate: Total monthly expenses (how much cash goes out before any revenue offset)
- Net Burn Rate: Monthly expenses minus monthly revenue (the actual rate at which cash reserves shrink)
- Runway: Months until cash is exhausted at the current net burn rate
- Annual Net Burn: Net burn multiplied by 12, useful for annual planning
- Revenue Coverage: What percentage of expenses is covered by incoming revenue
- Cash Balance Projection: Month-by-month forecast of remaining cash
How the Calculation Works
Gross Burn = Total Monthly Expenses
Net Burn = Monthly Expenses - Monthly Revenue
Runway = Cash Balance / Net Burn
Annual Net Burn = Net Burn x 12
Gross burn tells you the total cash outflow regardless of revenue. A company spending $100,000 per month has a gross burn of $100,000 even if it earns $80,000 in revenue. Net burn is the more useful number for runway calculations because it reflects the actual rate at which your cash reserves are depleting. If the same company earns $80,000, the net burn is $20,000, and the runway is calculated against that figure, not the gross burn.
If revenue exceeds expenses, net burn is negative (meaning you are cash-flow positive) and runway is effectively infinite. The calculator shows "Infinite" in this case.
How to Use the Calculator
- Enter your current cash balance. Include checking, savings, and any liquid investments you can access within 30 days
- Enter your average monthly revenue. Use the last 3 months as a baseline if revenue fluctuates
- Enter your total monthly expenses. Include salaries, rent, utilities, software subscriptions, marketing spend, contractor payments, and any other recurring cash outflows
- Review your net burn rate and runway
- Check the cash balance projection to see when you hit zero
Example Calculations
Example 1: Pre-Revenue Startup
A pre-revenue startup has $750,000 in seed funding. Monthly expenses are $40,000 (two founders, one contractor, office, software). Revenue is $0.
- Gross burn: $40,000/month
- Net burn: $40,000/month (no revenue to offset)
- Runway: 18.75 months ($750,000 / $40,000)
- Annual net burn: $480,000
Example 2: Early-Stage SaaS
A SaaS startup has $1,200,000 in the bank. Monthly revenue is $25,000 and growing. Monthly expenses are $60,000.
- Gross burn: $60,000/month
- Net burn: $35,000/month ($60,000 - $25,000)
- Runway: 34.3 months ($1,200,000 / $35,000)
- Revenue coverage: 42% of expenses covered by revenue
Real World Scenarios
Extending Runway by Cutting Costs
A startup has $300,000 in cash, $15,000 in monthly revenue, and $50,000 in monthly expenses. Net burn is $35,000 and runway is 8.6 months. The CEO identifies $8,000 in non-essential spending (unused software, a contractor working on a paused project, premium office space they do not need). Cutting those expenses reduces monthly expenses to $42,000, net burn to $27,000, and extends runway to 11.1 months. The $8,000 monthly saving buys 2.5 additional months of runway. If the company expects to close a funding round in 10 months, the cut is the difference between surviving and running out of cash.
The Impact of Revenue Growth on Burn
A company has $500,000 in cash, $5,000 in monthly revenue, and $30,000 in monthly expenses. Net burn is $25,000 and runway is 20 months. Over the next 12 months, revenue grows 15% month-over-month (compounding). By month 12, revenue reaches $26,700. Net burn drops from $25,000 to $3,300. Runway extends from 20 months to over 150 months. This illustrates why revenue growth is the most powerful lever for extending runway. The calculator uses static revenue, but you can model growth by entering different revenue values and comparing the runway outputs.
Fundraising Timing
A startup has $600,000 in cash, $10,000 in revenue, and $45,000 in expenses. Net burn is $35,000, runway is 17.1 months. The founders want to raise a Series A. Fundraising typically takes 3 to 6 months from start to close. They should start raising when they have at least 9 months of runway remaining, which means starting now (they have 17 months, but accounting for the 6-month fundraising process, they will have 11 months left when the round closes, giving a 5-month buffer). If they wait 6 months, runway drops to 11.1 months, and they would have only 5.1 months left after a 6-month raise, which is dangerously thin.
Common Mistakes to Avoid
- Using gross burn instead of net burn for runway: If you have revenue, gross burn overstates your cash consumption. Runway should be calculated against net burn, which accounts for revenue offsetting expenses
- Forgetting one-time expenses: Annual insurance premiums, annual software renewals, and equipment purchases can create spikes in monthly burn. Average these over 12 months or account for them separately
- Not updating the calculation regularly: Burn rate changes as you hire, cut costs, or grow revenue. Recalculate monthly. A burn rate from 6 months ago may be wildly inaccurate
- Ignoring accounts payable and receivable: If you have invoices going out but not yet paid, your cash balance may be lower than expected when those payments come due. Track committed but unpaid obligations
Limitations of This Calculator
This calculator uses a static model that assumes constant monthly revenue and expenses. Real businesses have variable revenue (seasonal fluctuations, churn, upsells), variable expenses (hiring spikes, one-time purchases), and non-linear cash flow. The projection does not account for accounts receivable timing, deferred revenue, or upcoming committed spending. It does not model revenue growth or expense changes over time. For detailed financial modeling, use dedicated startup finance tools like Pry, Mosaic, or a custom spreadsheet model.
Authoritative Research & Resources
- Investopedia - Burn Rate - A comprehensive reference on burn rate, explaining gross vs. net burn, how runway is calculated, and why investors track this metric closely.
- Y Combinator - How to Calculate Burn Rate and Runway - YC's practical guide for founders on tracking burn rate, with real-world examples and advice on when to start fundraising.
- SBA - How to Calculate Your Startup's Burn Rate - The Small Business Administration's guide to understanding and managing burn rate for early-stage businesses.