Burn Rate
Burn rate is how much cash a company spends each month. Net burn subtracts incoming revenue and determines runway.
Updated October 1, 2026
Burn rate is how much cash a company spends, usually per month. Burn rate and cash on hand together set your runway, the number of months before you need more money or a profit.
Gross vs net burn
- Gross burn is total cash spent per month, ignoring revenue.
- Net burn is cash spent minus cash collected.
Net burn = monthly cash out − monthly cash in
A startup spends $100,000 a month and collects $40,000. Gross burn is $100,000. Net burn is $100,000 − $40,000 = $60,000. Use net burn for runway, because revenue makes the cash last longer.
Why it matters
- Cash on hand divided by net burn is your runway in months.
- Every hire or tool purchase costs a measurable amount of runway.
- Net burn should fall as MRR grows. Burn that grows faster than revenue is a warning sign.
Managing burn
Spending ahead of revenue to win customers is normal for a growth company. The question is what the spending buys. A reasonable CAC and good retention mean the burn turns into lasting revenue. The Rule of 40 says growth rate plus profit margin should be at least 40%, so high burn needs fast growth to justify it.