Run Rate Calculator
The Run Rate calculator helps you estimate how long your company can operate with its current cash reserves and burn rate. Understanding your burn rate is crucial for financial planning, fundraising, and ensuring business sustainability.
Understanding Run Rate
Run Rate is a financial metric that indicates how many months a company can continue to operate at its current spending level before it runs out of cash. It's calculated by dividing the company's total current cash balance by its average monthly burn rate.
Burn Rate is the rate at which a company spends its cash reserves, typically measured on a monthly or quarterly basis. It includes all operating expenses, such as salaries, rent, marketing, and research and development, minus any revenue generated.
A higher run rate generally indicates a healthier financial position, providing more runway to achieve profitability or secure additional funding. Conversely, a low run rate signals a need for immediate cost-cutting measures or a renewed focus on revenue generation and fundraising.
Example Calculation:
Suppose a startup has a current cash balance of $500,000 and an average monthly burn rate of $50,000. To calculate the run rate:
Run Rate = Current Cash Balance / Average Monthly Burn Rate
Run Rate = $500,000 / $50,000 = 10 months
This means the startup has approximately 10 months of runway left before it exhausts its current cash.
function calculateRunRate() { var currentCash = parseFloat(document.getElementById("currentCash").value); var monthlyBurnRate = parseFloat(document.getElementById("monthlyBurnRate").value); var resultDiv = document.getElementById("result"); if (isNaN(currentCash) || isNaN(monthlyBurnRate)) { resultDiv.innerHTML = "Please enter valid numbers for both fields."; return; } if (monthlyBurnRate <= 0) { resultDiv.innerHTML = "Monthly burn rate must be greater than zero."; return; } var runRate = currentCash / monthlyBurnRate; resultDiv.innerHTML = "Your estimated run rate is: " + runRate.toFixed(2) + " months"; }