Why this matters
Burn rate is the single most watched financial metric in the startup world. It tells you how fast your company is consuming its cash reserves, and when combined with your current balance, it tells you how many months you have before the money runs out. That runway number determines everything from hiring plans to fundraising urgency. A founder who does not know their burn rate is flying blind, and investors will ask about it in every board meeting and due diligence conversation.
The calculation itself is straightforward: subtract your ending cash from your starting cash, then divide by the number of months elapsed. The result is your average monthly burn rate. Divide your current cash balance by that burn rate, and you get runway in months. Despite the simplicity of the math, many founders calculate it incorrectly by mixing gross and net burn, forgetting to account for revenue, or using the wrong time period. This tool enforces the correct inputs and produces both the burn rate and runway in a single step.
Understanding the distinction between gross burn and net burn is critical. Gross burn is your total monthly spending regardless of revenue. Net burn subtracts monthly revenue from spending, showing how fast you are actually depleting cash. If your revenue covers half your expenses, your net burn is half your gross burn, and your runway is effectively doubled. This calculator uses net burn by default since it reflects the true cash trajectory.
Reference table
| Metric | Description |
|---|---|
| Starting cash | Cash balance at the beginning of the measured period |
| Ending cash | Cash balance at the end of the measured period |
| Months elapsed | Number of months between the two balance snapshots |
| Monthly burn rate | Average cash consumed per month over the period |
| Runway | Months of remaining operation at the current burn rate |
How to use it
Enter your starting cash balance at the beginning of the measurement period.
Enter your ending cash balance after the period has elapsed.
Enter the number of months between the two balance snapshots.
Review the calculated monthly burn rate and the runway figure showing months until cash depletion.
Testing your result
Verify the calculation by hand: subtract the ending cash from the starting cash and divide by the number of months. For example, starting with $500,000 and ending with $350,000 over 5 months gives a burn rate of $30,000 per month. Divide the ending balance of $350,000 by $30,000 to get approximately 11.7 months of runway. If the tool matches this manual calculation, the output is correct. Also confirm that entering an ending balance higher than the starting balance produces negative burn and infinite runway.
Common mistakes
Using gross spending without subtracting revenue, which overstates the actual cash depletion rate.
Measuring over too short a period, such as a single month, which makes the burn rate sensitive to one-time expenses.
Including non-cash items like depreciation or stock-based compensation in the cash figures.
Ignoring upcoming large expenses like annual contracts or tax payments that will spike future burn.
Edge cases and options
When your ending cash is higher than your starting cash, you have negative burn, meaning the business is generating more cash than it spends. The tool displays infinite runway in this case since there is no projected depletion date. For pre-revenue startups, the ending balance will always be lower than the starting balance, and the burn rate equals the gross spending rate. VCs typically expect 12 to 18 months of runway after a funding round, so if your calculated runway falls below 6 months, it signals an urgent need to either cut costs or raise capital. Seasonal businesses should calculate burn rate over at least a full quarter to smooth out revenue fluctuations.
Real-world use cases
Calculating runway after a seed funding round to determine when the Series A fundraising process should begin.
Tracking monthly burn rate across consecutive quarters to identify whether cost-cutting measures are working.
Preparing burn rate and runway figures for a board meeting or investor update presentation.
Modeling the impact of a proposed hire on runway by adjusting the ending cash projection.
Frequently asked questions
Q: What is burn rate?
A: The rate at which a company spends its cash reserves, typically measured monthly. Net burn equals cash spent minus revenue, while gross burn equals total cash spent ignoring revenue.
Q: What is a healthy runway?
A: VCs typically want 12 to 18 months of runway to allow time for product iteration and the next funding round. Below 6 months is considered critical.
Q: Should I use gross or net burn?
A: Both are useful. Gross burn shows spending discipline, while net burn accounts for revenue and shows progress toward profitability. Use net burn for runway calculations once you have meaningful revenue.
Q: What if my ending cash is higher than starting?
A: You have negative burn, meaning you are generating cash. Runway shows as infinite since you are not running out.
Q: How often should I recalculate?
A: Monthly is standard. Recalculate whenever you have a significant change in revenue, expenses, or cash balance to keep your runway estimate accurate.
Start using it now
Try the Burn Rate Calculator tool. See also Startup Runway Calculator and ROI Calculator and NPV Calculator.
