function calculateNetBurn() {
// Get Inputs
var revenueInput = document.getElementById('monthlyRevenue');
var expensesInput = document.getElementById('monthlyExpenses');
var cashInput = document.getElementById('cashBalance');
var revenue = parseFloat(revenueInput.value);
var expenses = parseFloat(expensesInput.value);
var cash = parseFloat(cashInput.value);
// Validation
if (isNaN(revenue) || isNaN(expenses) || isNaN(cash)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (revenue < 0 || expenses < 0 || cash < 0) {
alert("Values cannot be negative.");
return;
}
// Calculations
// Gross Burn Rate is simply the total expenses per month
var grossBurn = expenses;
// Net Burn Rate = Expenses – Revenue
var netBurn = expenses – revenue;
// Runway Calculation
var runwayText = "";
var runwayElement = document.getElementById('resRunway');
var netBurnElement = document.getElementById('resNetBurn');
// Reset classes
runwayElement.className = "result-value";
netBurnElement.className = "result-value";
if (netBurn <= 0) {
// Profitable or break-even
netBurnElement.innerHTML = "+$" + Math.abs(netBurn).toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2}) + " (Profit)";
netBurnElement.className += " success";
runwayText = "Infinite (Cash Flow Positive)";
runwayElement.className += " success";
} else {
// Losing money
netBurnElement.innerHTML = "-$" + netBurn.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
netBurnElement.className += " danger";
if (cash <= 0) {
runwayText = "0 Months (Out of Cash)";
runwayElement.className += " danger";
} else {
var months = cash / netBurn;
runwayText = months.toFixed(1) + " Months";
if (months < 6) {
runwayElement.className += " danger";
} else if (months < 12) {
runwayElement.style.color = "#fd7e14"; // Warning orange
} else {
runwayElement.className += " success";
}
}
}
// Display Results
document.getElementById('resGrossBurn').innerHTML = "$" + grossBurn.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resRunway').innerHTML = runwayText;
document.getElementById('results').style.display = 'block';
}
Understanding Net Burn Rate for Startups
For early-stage startups and growing businesses, cash flow management is critical to survival. The Net Burn Rate is one of the most important metrics for founders and investors, as it measures the rate at which a company is losing money. Unlike generic loan calculators, this tool focuses specifically on the operational efficiency and financial runway of a business.
Key Definition: Net Burn Rate is the amount of money a company loses each month after accounting for incoming revenue. It answers the question: "How much cash are we burning through to keep the lights on?"
Net Burn vs. Gross Burn
It is crucial to distinguish between Gross Burn and Net Burn, as they tell different stories about a company's finances:
Gross Burn Rate: This represents the total amount of money spent on operating expenses each month (Salaries, Rent, Server Costs, Marketing, etc.). It does not take revenue into account.
Net Burn Rate: This is the total money lost per month. It is calculated by subtracting your monthly revenue from your monthly gross burn. If your revenue exceeds your expenses, you have a "negative burn rate," meaning you are cash flow positive.
How to Calculate Net Burn Rate
The formula for Net Burn Rate is straightforward:
Net Burn Rate = Monthly Operating Expenses – Monthly Revenue
For example, if a SaaS company spends $50,000 per month on staff and servers, and generates $10,000 in monthly recurring revenue (MRR):
Gross Burn = $50,000
Net Burn = $50,000 – $10,000 = $40,000 per month
Calculating Startup Runway
The primary reason to calculate burn rate is to determine your Runway. Runway is the estimated amount of time (usually in months) before the company runs out of cash.
Runway = Current Cash Balance / Net Burn Rate
Using the example above, if the company has $400,000 in the bank:
$400,000 / $40,000 = 10 Months of Runway.
This means the founders have 10 months to either become profitable or raise additional funding before the company becomes insolvent.
Why Investors Care About Burn Rate
Venture Capitalists (VCs) and angel investors look at burn rate to assess the efficiency and sustainability of a startup. A high burn rate is acceptable if the company is growing rapidly (spending to acquire customers), but a high burn rate with low growth is a red flag. Typically, investors prefer to see a runway of at least 12 to 18 months following a funding round.
Tips for Reducing Burn Rate
Audit Subscriptions: Review software (SaaS) subscriptions and cancel unused licenses.
Review COGS: Negotiate better rates with hosting providers or suppliers.
Marketing Efficiency: Focus heavily on organic channels (SEO) rather than solely on paid ads if the Cost Per Acquisition (CPA) is too high.
Hiring Freeze: Delay non-essential hires until revenue targets are met.