Definition
Burn rate measures how quickly a company spends cash. Teams often track monthly gross burn and net burn.
Example
If monthly cash outflows are $500k and cash inflows are $350k, gross burn is $500k and net burn is $150k.
How to use it
- Gross burn: total cash outflows.
- Net burn: cash outflows minus cash inflows.
Measured as
Measure Burn Rate with the same date, unit basis, and accounting or policy definitions used in the rest of your model.
Operator takeaway
- Gross burn: total cash outflows.
- Net burn: cash outflows minus cash inflows.
- Tie Burn Rate to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Quantify the impact with Cash Runway Calculator if you need to turn the definition into an operating assumption.
- Read Cash runway: how to estimate burn, break-even, and survival time if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- Cash Runway Calculator: Estimate runway from cash balance, revenue, gross margin, and operating expenses (optionally with revenue growth).
- Burn Multiple Calculator: Calculate burn multiple: net burn / net new ARR (a growth efficiency metric).
Guides
- Cash runway: how to estimate burn, break-even, and survival time: A practical guide to runway: net burn, gross profit, break-even revenue, and how to avoid common cash planning mistakes.
- Burn multiple: definition, formula, and how to use it: Burn multiple explained: net burn / net new ARR. Learn how to compute it, interpret it, and avoid common mistakes.
- Unit economics hub: CAC, LTV, payback, and runway (a practical stack): A practical hub for unit economics: CAC, fully-loaded CAC, LTV, payback, margin impacts, burn multiple, and runway planning.
- Runway and burn: gross vs net burn, working capital, and cash levers: A practical guide to runway: compute net burn, understand why cash differs from profit, and how working capital and collections change runway.