How is burn rate different from runway?

Burn rate is how fast you spend cash; runway is how long the cash lasts at that pace. Runway in months = cash on hand ÷ monthly net burn. $600,000 in the bank at $60,000 net burn a month is 10 months of runway.

What does it mean if my net burn is zero or negative?

Revenue covers your spending, so the company is not burning cash and runway is not limited by your bank balance. This calculator shows "not burning cash" instead of an endless runway figure.

Should I use expenses and revenue, or two cash balances?

Use expenses and revenue when you want gross and net burn separately. Use two cash balances when you want the real average, including one-off payments and late invoices. Pick two dates with no fundraise or loan between them, or the money raised will hide your burn.

Free tool

Burn Rate Calculator

This burn rate calculator works out your startup burn rate two ways: from monthly expenses and revenue, or from two bank balances. It gives gross burn, net burn, runway in months and, if you add net new ARR, your burn multiple.

Calculate your burn rate

Numbers only; commas and $ signs are fine. Results update as you type.

How do you want to calculate burn?

From expenses and revenueGross and net burnFrom two cash balancesAverage net burn

Monthly operating expenses

Payroll, rent, software, marketing: everything you spend in a month.

Monthly revenue (optional)

Cash you actually collect each month. Leave blank if pre-revenue.

Cash on hand (optional)

Cash in the bank today. Used for runway.

Net new ARR per month (optional)

New + expansion ARR minus churned ARR, per month. Can be negative. For burn multiple.

Enter your monthly operating expenses. Your results appear here.

What is burn rate?

Direct Answer: Burn rate is the amount of cash a company spends each month. Gross burn is total monthly operating expenses. Net burn is gross burn minus monthly revenue, the amount your bank balance actually falls each month. Divide cash on hand by net burn to get runway in months.

Investors usually ask for net burn, because it decides how long the money lasts. Gross burn matters too: it is what you would spend if every customer left tomorrow. Paul Graham's October 2015 essay puts the question founders should be able to answer as whether they are “default alive or default dead”: do they reach profitability on the money they have left, if expenses stay constant and revenue keeps growing at its recent rate?

How do you calculate burn rate?

From expenses and revenue

Gross burn = monthly operating expenses

Net burn = gross burn − monthly revenue

$80,000 of expenses and $20,000 of revenue: gross burn $80,000, net burn $60,000.

From two cash balances

Net burn = (earlier balance − later balance) ÷ months between

$900,000 on 1 January and $600,000 on 1 July: $300,000 ÷ 6 = $50,000 a month.

How do you calculate runway and burn multiple from burn?

Runway (months) = cash on hand ÷ net burn. $600,000 at $60,000 a month is 10 months.
Burn multiple = net burn ÷ net new ARR, over the same period. It tells you how many dollars you burn for each dollar of new annual recurring revenue.

What is the difference between gross burn and net burn?

Both are monthly figures. Gross burn ignores revenue; net burn subtracts it. Using the same example of $80,000 in expenses and $20,000 in revenue:

	Gross burn	Net burn
Formula	Monthly operating expenses	Gross burn − monthly revenue
Example	$80,000 a month	$60,000 a month
Question it answers	What does it cost to run the company each month?	How fast is the bank balance falling?
Used for	Budgets, cost cuts, the worst case if revenue stops	Runway, burn multiple, fundraising timing
Can it be below zero?	No	Yes: below zero means revenue covers spending

What is a healthy burn rate for a startup?

There is no single healthy dollar figure: $100,000 a month is fine for a company adding $150,000 of ARR a month and dangerous for one adding nothing. That is why investors judge burn against growth. The common yardstick is the burn multiple, introduced by David Sacks of Craft Ventures in “The Burn Multiple” (April 2020).

What is a good burn multiple?

Sacks's rules of thumb for venture-stage startups:

Burn multiple	Efficiency	Burned for each $1 of net new ARR
Under 1x	Amazing	Less than $1
1x – 1.5x	Great	$1 to $1.50
1.5x – 2x	Good	$1.50 to $2
2x – 3x	Suspect	$2 to $3
Over 3x	Bad	More than $3

Source: David Sacks, “The Burn Multiple”, 23 April 2020.

Does a good burn multiple depend on the company's stage?

Yes. Sacks expects the multiple to fall as a company matures: a seed-stage company might sit around 3x because it has only just started selling, and around 2x after its Series A. For a company to become profitable, burn must reach zero, so the multiple should head toward zero over time. A pre-revenue startup has no net new ARR, so the ratio does not compute at all; at that stage the job is keeping burn low.

How can a startup reduce its burn rate?

Net burn has two sides, so there are two kinds of lever: spend less, or collect more cash sooner.

1Slow the hiring plan. Each hire adds to gross burn every month they stay, so the hiring plan is the lever with the longest tail.
2Audit recurring spend. Cancel unused software seats and contractors; small subscriptions add up across a team.
3Collect cash faster. Offer a discount for annual prepayment and chase overdue invoices; both lower net burn without cutting anything.
4Cut what does not drive growth. Spending that does not produce new ARR raises your burn multiple as well as your burn.
5Review burn monthly. Comparing this month with last month catches creeping costs before they cost you months of runway.