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metrics

Burn Rate

Rate of cash consumption.

Burn Rate measures how quickly your startup consumes cash each month. There are two types: Gross Burn (total expenses) and Net Burn (expenses minus revenue). This metric is crucial for calculating your runway and planning fundraising.

Formula

Net Burn = Monthly Expenses - Monthly Revenue

Net Burn is calculated by subtracting your monthly revenue from your total monthly expenses. A negative burn means you are cash-positive.

Concrete Example

A startup with $30,000 in monthly expenses and $15,000 in revenue.

Net Burn = $30,000 - $15,000 = $15,000/month

The startup burns $15,000 cash per month.

SaaS Benchmarks

< $0 (Profitable)Cash Positive - Generating cash
$0 - $20KControlled - Reasonable burn
$20K - $50KModerate - Monitor runway
> $50KHigh - Justify by growth

Tips

  • Track Gross vs Net Burn for better understanding
  • Identify optimizable expense categories
  • Acceptable burn depends on runway and growth
  • In crisis, aim for "default alive"

Common Mistakes

  • Confusing Gross Burn and Net Burn
  • Ignoring seasonal variations
  • Not anticipating future expenses (hiring, infrastructure)

Calculate your Burn Rate

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Related Terms

RUNWAYGROSS MARGINEBITDACOGS

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