Calculate your monthly cash burn and runway based on historical data.
Analysis Results
Total Cash Burned:–
Monthly Net Burn Rate:–
Estimated Runway:–
function calculateBurnRate() {
// Get input values
var startBal = parseFloat(document.getElementById('starting_balance').value);
var endBal = parseFloat(document.getElementById('ending_balance').value);
var months = parseFloat(document.getElementById('time_period').value);
var resultDiv = document.getElementById('br_results');
var totalBurnSpan = document.getElementById('total_burn_result');
var monthlyBurnSpan = document.getElementById('monthly_burn_result');
var runwaySpan = document.getElementById('runway_result');
var summaryP = document.getElementById('br_summary');
// Validation
if (isNaN(startBal) || isNaN(endBal) || isNaN(months) || months 0) {
// Company is burning cash
runway = endBal / monthlyBurn;
totalBurnSpan.innerHTML = formatter.format(totalBurn);
totalBurnSpan.className = 'value'; // Red color
monthlyBurnSpan.innerHTML = formatter.format(monthlyBurn);
monthlyBurnSpan.className = 'value'; // Red color
if (endBal <= 0) {
runwaySpan.innerHTML = "0 Months (Out of Cash)";
summaryP.innerHTML = "Alert: Your cash balance is depleted.";
} else {
runwaySpan.innerHTML = runway.toFixed(1) + " Months";
summaryP.innerHTML = "At your current spending rate, you have approximately " + runway.toFixed(1) + " months before you run out of cash.";
}
} else if (monthlyBurn < 0) {
// Company is generating cash (negative burn)
totalBurnSpan.innerHTML = "+" + formatter.format(Math.abs(totalBurn));
totalBurnSpan.className = 'positive'; // Green color
monthlyBurnSpan.innerHTML = "+" + formatter.format(Math.abs(monthlyBurn));
monthlyBurnSpan.className = 'positive'; // Green color
runwaySpan.innerHTML = "Infinite (Cash Positive)";
runwaySpan.className = 'positive';
summaryP.innerHTML = "Great job! Your cash balance increased over this period. You are currently cash flow positive.";
} else {
// Break even
totalBurnSpan.innerHTML = "$0.00";
monthlyBurnSpan.innerHTML = "$0.00";
runwaySpan.innerHTML = "Infinite (Break Even)";
summaryP.innerHTML = "You are currently breaking even. Your cash balance remained unchanged.";
}
}
What is a Burn Rate Calculation?
In the world of startups and business finance, knowing what a burn rate calculation is can be the difference between success and insolvency. Burn rate refers to the speed at which a company is depleting its cash pool in a loss-generating scenario. It is a critical metric used by founders and investors to determine financial health and sustainability.
Essentially, the burn rate tells you how much money the company is spending over its income each month. This metric is directly tied to the "Runway," which calculates how much time the company has left before it runs out of money completely.
Types of Burn Rate
When calculating burn rate, it is important to distinguish between the two primary types:
Gross Burn Rate: This is the total amount of operating expenses the company incurs each month (e.g., salaries, rent, server costs) without considering any revenue.
Net Burn Rate: This is the rate at which the company loses money after accounting for incoming revenue. This is the most crucial figure for calculating runway.
The Formula
The calculator above uses the standard formula for Net Burn Rate based on historical cash balances. The logic is as follows:
Net Burn Rate = (Starting Cash Balance – Ending Cash Balance) / Time Period
Once you have the Net Burn Rate, you can calculate the Runway:
Runway (Months) = Current Cash Balance / Monthly Net Burn Rate
Why is this calculation important?
Understanding your burn rate helps in strategic planning. If your burn rate is too high, you may need to cut costs or raise capital sooner than expected. Investors look closely at this metric to evaluate the efficiency of the management team and to gauge when the next funding round will be necessary.
Example Calculation
Imagine a startup begins Q1 (January 1st) with $500,000 in the bank. By the end of Q1 (March 31st), after 3 months, the bank balance is $410,000.
Total Cash Burned: $500,000 – $410,000 = $90,000
Time Period: 3 Months
Monthly Burn Rate: $90,000 / 3 = $30,000/month
Runway: $410,000 / $30,000 = 13.6 Months
In this example, the startup has just over a year of operation left at the current spending velocity before they must become profitable or raise more funds.