Burn rate is the cash leaving your business each month. It decides how long you have, and most founders can only estimate it — which is a problem, because the estimate is always optimistic.
Calculator
Burn rate calculator
Two ways to work it out. Bank balances is quicker; revenue and expenses tells you more, because it separates gross burn from net burn.
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Gross burn and net burn are different numbers
Most calculators give you one figure and call it burn. There are two, they answer different questions, and confusing them is how a board meeting goes wrong.
- Gross burn
- Total cash going out each month — payroll, rent, software, everything — ignoring anything coming in. This is what you would burn if revenue stopped tomorrow, which makes it the number for a downside case.
- Net burn
- Cash out minus cash in. What your bank balance actually falls by. Runway is calculated from this one, and it is what people usually mean when they say "burn".
Gross burn = Total monthly cash expenses
Net burn = Total monthly cash expenses − Monthly cash revenue
A negative net burn is not an error. It means more came in than went out.
The two ways to calculate it
From your bank balances
The quickest method, and the one most calculators use. Take the closing cash balance for each month and subtract the newer from the older.
Monthly burn = Closing cash last month − Closing cash this month
Average across several months. Two balances give you one data point, which is not an average.
From revenue and expenses
Slower, and worth it. Take a representative month and separate what came in from what went out. This gives you gross and net burn separately, and it is not distorted by financing or by timing.
The catch is that it needs your expenses categorized correctly for a month that has actually closed. That is precisely what most small companies cannot produce on demand — which is the real reason burn rate gets estimated rather than calculated.
How much runway should you hold?
The common advice is 18 months, and that number is not arbitrary — it comes from how long companies actually take between funding rounds. Analysis of Crunchbase data by Radicle Labs found:
| Round | Average gap | Median gap |
|---|---|---|
| Seed → Series A | 18.1 months | 15.0 months |
| Series A → Series B | 20.3 months | 17.0 months |
| Series B → Series C | 22.0 months | 19.0 months |
| Series C → Series D | 21.7 months | 19.0 months |
| Overall | 20.6 months | 18.0 months |
The 18-month median is where the rule of thumb comes from. Raising takes three to six months of full attention, so 18 months of runway means roughly a year of building before fundraising has to start. Below 12 months you are raising whether you planned to or not, and from a weaker position, because the other side can see the clock.
When burn rate stops being the right metric
Once you are consistently cash-flow positive, burn rate is close to meaningless — you are not burning. What matters then is cash conversion: the gap between doing the work and being paid for it. A profitable business can still run out of money if customers pay in 90 days and staff get paid every two weeks.
Burn is also a poor guide on its own. A high burn spent on engineers building something customers want is not the same as a high burn spent on software nobody logs into, and no single number separates them. The question is never just whether burn is too high — it is what the burn is buying.
Frequently asked questions
What is a good burn rate for a startup?
There is no universal figure — burn only means something relative to your cash, your stage, and what the spending buys. The useful test is runway: at this burn, do you have enough months to reach the next milestone, plus three to six to raise against it? If yes, the burn is defensible. If not, it is too high regardless of the absolute number.
What is the difference between gross burn and net burn?
Gross burn is all cash going out, ignoring revenue. Net burn is cash out minus cash in — what your bank balance actually falls by. Runway is calculated from net burn; gross burn tells you what happens if revenue disappears.
How do I calculate burn rate from my bank statements?
Take the closing balance for each of the last few months and subtract each month from the one before it, then average those differences. Be aware this treats funding, tax payments and customer prepayments as operating burn, which they are not.
Can burn rate be negative?
Yes, and it is not an error. Negative burn means more cash came in than went out — either you are profitable, or something one-off landed such as a funding round or a large prepayment. Worth checking which, because they mean very different things.
How many months of data should I use?
At least three, ideally six. One month is noise: a quarterly tax payment or an annual insurance renewal can double a single month of burn without anything having actually changed.
Does burn rate include one-off expenses?
It does if you calculate from bank balances, which is a reason to look at several months. For decisions, strip genuinely one-off items out and track them separately — otherwise you will cut a recurring cost to solve a problem caused by a payment that will not repeat.