Gross Burn Rate Calculator
What is Gross Burn Rate?
Gross burn rate represents the total amount of cash a company spends each month to keep its operations running. Unlike "Net Burn Rate," which factors in revenue, the Gross Burn Rate focuses exclusively on outgoing cash flow. This metric is vital for startups and pre-revenue companies to understand their spending velocity and manage their runway.
How to Calculate Gross Burn Rate
The calculation for gross burn rate is straightforward: you sum all operating expenses incurred within a specific month. The formula is:
Gross Burn Rate = Salaries + Rent + Marketing + Tech + General Admin
Gross Burn vs. Net Burn
While gross burn tells you how much money is leaving the bank, Net Burn tells you how much money you are actually losing. If your gross burn is $50,000 but you earn $20,000 in revenue, your net burn is $30,000. For early-stage startups with zero revenue, gross burn and net burn are the same.
A SaaS startup has 4 employees costing $32,000/month. They pay $3,000 for a co-working space, $5,000 on Google Ads, and $1,500 on AWS/Software.
Calculation: $32,000 + $3,000 + $5,000 + $1,500 = $41,500 Monthly Gross Burn.
Why Tracking Gross Burn Matters
- Runway Planning: If you have $500,000 in the bank and a gross burn of $50,000, you have exactly 10 months to become profitable or raise more capital.
- Operational Efficiency: It helps identify "leaky buckets" in your spending before they become critical issues.
- Investor Reporting: Venture capitalists closely monitor gross burn to ensure the founding team is disciplined with capital.