Cash Burn Rate & Runway Calculator
What is a Cash Burn Rate?
In the startup world, the cash burn rate represents the rate at which a company uses up its cash reserves or venture capital to cover operating expenses before generating positive cash flow from operations. Understanding this metric is vital for financial planning and fundraising strategy.
Gross Burn vs. Net Burn
Gross Burn Rate: This is the total amount of operating costs you incur each month. It includes rent, salaries, software subscriptions, and marketing. It does not account for any revenue coming in.
Net Burn Rate: This is the "real" rate at which you are losing money. It is calculated by taking your total expenses and subtracting your total revenue. If your net burn is negative, you are cash-flow positive!
How to Calculate Burn Rate in Excel
While this calculator provides an instant answer, many founders prefer a cash burn rate calculation excel model for long-term forecasting. To build this in Excel:
- Step 1: List all monthly cash outflows in Column A.
- Step 2: List all monthly cash inflows in Column B.
- Step 3: In Column C, subtract Inflows from Outflows (Outflow – Inflow) to find the Net Burn.
- Step 4: To find the Runway, use the formula:
=Current_Cash / Net_Burn_Rate.
Real-World Example
Imagine a tech startup with $500,000 in the bank. Every month, they spend $50,000 on developers and AWS (Gross Burn). However, they generate $20,000 in SaaS subscriptions. Their Net Burn is $30,000 per month ($50,000 – $20,000). Their runway is 16.6 months ($500,000 / $30,000).