Burn Rate Calculator

What is Burn Rate?

Burn rate measures how quickly a company spends its cash reserves over a given period, almost always expressed as a monthly figure. It is one of the most important metrics for startups because it directly answers the question: "How long can we keep operating before we run out of money?"

Investors, board members, and founders all track burn rate to make decisions about hiring, fundraising timelines, and spending cuts. If your burn rate is too high relative to your cash on hand, you risk running out of runway before reaching profitability or your next funding round. If it is too low, you might be under-investing in growth.

Gross vs Net Burn Rate

There are two ways to measure burn rate, and both are useful for different reasons.

Gross Burn Rate

Gross burn rate is the total amount of money your company spends each month, regardless of any revenue coming in. It includes salaries, rent, software subscriptions, marketing spend, and every other operating expense.

Gross burn is useful for understanding your total cost structure. Even if revenue fluctuates, gross burn tells you the baseline cost of keeping the lights on.

Net Burn Rate

Net burn rate accounts for revenue. It shows the actual amount of cash you lose each month after subtracting what you earn. This is the number that determines how fast your bank balance drops.

Net burn is what most people mean when they say "burn rate" without a qualifier. It is the metric that feeds directly into your runway calculation.

Cash Runway

Cash runway tells you how many months your company can survive at the current net burn rate before running out of cash. The formula is straightforward:

For example, if you have $500,000 in the bank and a net burn of $35,000/month, your runway is approximately 14.3 months. Most venture-backed startups aim for at least 12 to 18 months of runway after each funding round. Dropping below 6 months is generally considered a danger zone that requires immediate action, whether that means cutting costs, accelerating revenue, or raising a bridge round.

Pairing this with a run rate calculator can help you project future revenue alongside your burn to get a more complete financial picture. You can also track recurring revenue trends with an MRR calculator to see how monthly revenue growth offsets your burn over time.

Burn Rate Benchmarks

While every company is different, there are some general benchmarks that founders and investors use to evaluate whether a burn rate is healthy:

• Pre-seed / Seed: $20,000 to $75,000/month net burn is typical. Teams are small (2 to 5 people), and the focus is on building an MVP and finding product-market fit.
• Series A: $75,000 to $200,000/month. The team grows to 10 to 30 people, and spending shifts toward sales, marketing, and scaling infrastructure.
• Series B+: $200,000 to $500,000+ per month. At this stage, companies are scaling aggressively and burn is expected to be high, but revenue growth should be outpacing it.

A commonly referenced rule of thumb from SaaStr is the "burn multiple": divide your net burn by your net new ARR. A burn multiple under 1.5x is excellent, 1.5x to 2x is good, and above 2x means you are spending inefficiently relative to your growth.

How to Reduce Burn Rate

If your runway is shorter than you'd like, there are several levers you can pull to extend it:

• Audit subscriptions and tools: SaaS costs creep up fast. Review every recurring charge quarterly and cancel anything your team no longer uses.
• Renegotiate contracts: Vendors, landlords, and service providers will often offer discounts if you commit to longer terms or pay upfront.
• Delay non-critical hires: Each new hire adds $8,000 to $15,000+ per month in fully-loaded cost. Be deliberate about which roles are essential right now versus six months from now.
• Focus on revenue: Even small amounts of revenue dramatically extend runway. Prioritize features and activities that bring in paying customers.
• Shift to usage-based pricing: If your costs scale with usage, align your pricing model so revenue scales alongside expenses.

The goal is not to minimize burn at all costs. Spending too little can mean missing market windows or losing to faster competitors. The goal is to spend efficiently: every dollar should move you closer to product-market fit or sustainable growth.

Frequently Asked Questions