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Burn Rate Calculator

How fast are you spending cash?

Enter your monthly expenses, revenue, and cash on hand to see your gross and net burn rate, how many months of runway you have, and when you will run out of money at your current pace. This is not a vanity metric—it is a survival metric.

Enter Your Numbers

Everything that goes out each month: payroll, rent, materials, insurance, utilities, subscriptions, debt payments, owner draws.

Average monthly revenue over the last 3–6 months. Use cash collected, not invoiced.

Total liquid cash across all business accounts: checking, savings, money market. Do not include receivables or inventory.

Gross Burn vs. Net Burn: Know the Difference

Burn rate is one of those terms that gets thrown around loosely, so let us define it precisely. There are two numbers that matter:

  • Gross burn rate is your total monthly expenses, period. Payroll, rent, materials, insurance, software, debt payments—everything that goes out the door. This number tells you how much it costs to keep the business running regardless of what comes in.
  • Net burn rate is your total monthly expenses minus your monthly revenue. This is the actual amount of cash you are consuming from reserves each month. If net burn is negative, congratulations—you are cash flow positive and adding to your reserves.

Many business owners only track gross burn, which paints an incomplete picture. A company with $50,000 in monthly expenses looks scary until you learn it brings in $48,000 in revenue. The net burn is only $2,000 per month—a manageable gap to close. On the other hand, a business with only $20,000 in expenses but zero revenue is in far worse shape.

Why Tracking Burn Matters Even for Profitable Businesses

If your business is profitable, you might think burn rate is irrelevant. It is not. Here is why:

  • Growth phases eat cash. When you hire ahead of revenue, invest in equipment, or take on a large project that requires materials upfront, your burn rate spikes. A profitable business can become cash-negative for months during a growth push. According to the JPMorgan Chase Institute, the median small business holds just 27 days of cash reserves. That is barely one month. A single large investment or delayed payment can tip you from positive to critical.
  • Seasonality creates temporary burn. Many businesses are profitable on an annual basis but burn cash during slow seasons. Landscaping companies, construction firms, and retail businesses all have months where expenses outpace revenue. Knowing your burn rate during those months tells you exactly how much cash reserve you need to build during peak season.
  • Burn rate is an early warning system. If your burn rate is climbing month over month while revenue stays flat, you have a developing problem. Catching it early gives you time to correct course. Catching it late means layoffs and panic cuts.

Startup Burn Rate Benchmarks

How much should a business burn? The answer depends heavily on stage, industry, and strategy. But here are some useful benchmarks from SBA research and industry data:

  • Pre-revenue startups: Net burn equals gross burn. The key question is runway. Most advisors recommend having at least 12–18 months of runway before you need to raise more capital or reach profitability.
  • Early-stage with revenue: Net burn should be declining month over month. If your net burn is flat or increasing while revenue grows, your cost structure is scaling faster than your income—a dangerous pattern.
  • Established small businesses: Net burn should ideally be zero or negative (meaning cash flow positive). If an established business is burning cash, something is wrong with pricing, volume, or cost control.
  • The 40% rule of thumb: Some financial professionals suggest that your monthly burn rate (gross) should not exceed 40% more than your monthly revenue. Once your expenses are more than 1.4x your revenue, closing the gap becomes increasingly difficult without outside capital.

How to Reduce Burn Without Killing Growth

The instinct when burn rate is high is to slash costs across the board. That is usually the wrong approach. Smart burn reduction is surgical, not indiscriminate. According to SCORE business advisors, here is how to approach it:

  1. Categorize expenses as growth or maintenance. Growth expenses (marketing, sales, new hires for capacity) should generate future revenue. Maintenance expenses (rent, insurance, back-office admin) keep the lights on but do not directly drive revenue. Cut maintenance first.
  2. Renegotiate before you eliminate. Before canceling a vendor, try renegotiating. Landlords, insurance brokers, software providers, and suppliers will often reduce pricing to keep a customer. This lowers burn without losing capability.
  3. Delay, do not cancel, growth investments. If you need to reduce burn, push planned hires or expansions out by 60–90 days. This preserves cash while keeping the growth plan alive. Permanent cuts to growth spending create a downward spiral.
  4. Accelerate revenue instead. The fastest way to reduce net burn is to increase collections. Shorten payment terms, offer early-payment discounts, send invoices immediately, and follow up aggressively on past-due accounts. Getting paid for work already done is easier than finding new customers.
  5. Measure weekly, not monthly. Tracking burn rate weekly gives you faster feedback. You will see the impact of changes within days rather than waiting 30 days for a monthly close.

Sources

Frequently Asked Questions

What is a good burn rate for a startup?

There is no universal number, but most advisors recommend that your net burn rate should give you at least 12-18 months of runway. For early-stage startups with revenue, net burn should be declining month over month. A common rule of thumb is that gross burn should not exceed 1.4x your monthly revenue — once expenses are more than 40% above revenue, closing the gap becomes very difficult without outside capital.

What is the difference between gross burn rate and net burn rate?

Gross burn rate is your total monthly expenses regardless of revenue — payroll, rent, materials, everything going out the door. Net burn rate is your total monthly expenses minus your monthly revenue, showing the actual cash you are consuming from reserves each month. A company with $50,000 in expenses and $48,000 in revenue has a gross burn of $50,000 but a net burn of only $2,000.

How do you calculate monthly burn rate?

To calculate net burn rate, subtract your monthly revenue from your monthly expenses. For example, if you spend $40,000 per month and bring in $25,000, your net burn rate is $15,000 per month. To calculate runway, divide your cash on hand by that net burn rate. With $90,000 in cash and a $15,000 net burn, you have 6 months of runway.

Should profitable businesses track burn rate?

Yes. Even profitable businesses can slip into negative cash flow during growth phases, seasonal dips, or large capital investments. The JPMorgan Chase Institute found the median small business holds just 27 days of cash reserves. Tracking burn rate weekly gives you an early warning system — if burn is climbing while revenue stays flat, you have a developing problem you can catch before it becomes a crisis.

How can I reduce my burn rate without killing growth?

Categorize expenses as growth (marketing, sales, new hires) or maintenance (rent, insurance, admin), and cut maintenance first. Renegotiate vendor contracts before canceling them. Delay planned growth investments by 60-90 days rather than cutting permanently. Most importantly, accelerate revenue collection — getting paid for work already done is faster than finding new customers or cutting costs.

How often should I calculate my burn rate?

Track burn rate weekly rather than monthly for faster feedback. Weekly tracking lets you see the impact of changes within days instead of waiting 30 days for a monthly close. Many business owners who track monthly miss developing problems until they become emergencies. A simple weekly check of cash in minus cash out takes five minutes and can save your business.

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