Startup Burn Rate & Runway Calculator
Analyze your startup's financial health and survival timeline.
How to Calculate Startup Burn Rate: A Complete Guide
For any startup founder, the "burn rate" is perhaps the most critical metric in the early stages of the business. It measures the rate at which a company is losing money—or spending its venture capital—before it reaches profitability or needs a new round of funding.
What is Burn Rate?
Burn rate refers to the amount of money your startup spends each month to stay in operation. It is typically calculated as a monthly figure. Understanding this metric allows you to determine your "runway," which is the amount of time you have before you run out of cash.
1. Gross Burn Rate
Gross burn is the total amount of spending your startup incurs every month. This includes salaries, rent, software subscriptions, server costs, and marketing. It doesn't take revenue into account.
Formula: Total Monthly Operating Expenses = Gross Burn
2. Net Burn Rate
Net burn is the actual amount of money you are losing each month. It is the difference between your gross burn and your revenue. If your revenue exceeds your expenses, you have a "negative burn" and are effectively profitable.
Formula: Gross Burn – Monthly Revenue = Net Burn
How to Calculate Your Runway
Once you know your net burn, calculating your runway is straightforward. This tells you how many months your business can survive at its current spending level.
Realistic Calculation Example
Let's look at a typical Seed-stage SaaS startup:
- Starting Cash: $600,000
- Gross Monthly Expenses: $45,000 (Salaries, AWS, Office)
- Monthly Revenue: $5,000
- Net Burn: $40,000 ($45k – $5k)
- Runway: 15 Months ($600,000 / $40,000)
In this scenario, the founder has 15 months to either reach profitability or secure Series A funding before the bank account hits zero.
Strategies to Extend Your Runway
If your burn rate is too high, you have three primary levers to pull:
- Reduce Expenses: Cut non-essential software, renegotiate vendor contracts, or optimize marketing spend.
- Increase Revenue: Focus on high-converting sales channels or adjust pricing models to bring in cash faster.
- Raise Capital: Start the fundraising process at least 6 months before your runway ends.