Gross Burn Rate & Runway Calculator
Calculate your startup's monthly cash outflow and estimated survival time.
What is Gross Burn Rate?
Gross burn rate represents the total amount of cash a company spends each month to keep its doors open, regardless of revenue. It is a critical metric for startups and early-stage companies to track because it reveals the absolute cost of operations.
Unlike Net Burn Rate (which subtracts revenue from expenses), Gross Burn Rate looks only at the outflow. This is essential for understanding your "worst-case scenario" if revenue were to suddenly stop or fail to materialize.
How to Calculate Gross Burn Rate
The formula for Gross Burn Rate is simple: add up every single operating expense incurred during the month. This typically includes:
- Payroll: Salaries, taxes, benefits, and contractor fees.
- Facilities: Rent, utilities, and insurance.
- Growth: Marketing budgets, advertising spend, and sales tools.
- Technology: Software subscriptions (SaaS), server costs, and hardware.
Formula: Gross Burn = Salaries + Rent + Marketing + G&A + Tech Costs
Understanding Cash Runway
Your cash runway is the amount of time your business has before it runs out of money, assuming your burn rate and cash balance stay constant. It is calculated by dividing your current cash balance by your monthly gross burn rate.
For example, if you have $500,000 in the bank and your monthly gross burn is $50,000, you have a 10-month runway. This metric tells founders exactly how much time they have to reach profitability or secure the next round of funding.
Example Calculation
Imagine a startup with the following monthly costs:
- Salaries: $30,000
- Office Rent: $4,000
- Marketing: $6,000
- Software Subscriptions: $2,000
The Monthly Gross Burn Rate would be $42,000. If that company has $252,000 in their bank account, their Runway is exactly 6 months ($252,000 / $42,000).
Strategies to Manage Burn Rate
Managing burn is a balancing act between growth and survival. Common strategies include:
- Focus on Unit Economics: Ensure that every dollar spent on marketing brings in more than a dollar in lifetime value.
- Variable vs. Fixed Costs: Keep fixed costs (like long-term office leases) low in favor of variable costs that can be scaled down quickly if needed.
- Extending Runway: Many founders aim for at least 18 months of runway to provide enough time to navigate market downturns or fundraising cycles.