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.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Burn Rate" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Cash Runway Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Cash runway: how to estimate burn, break-even, and survival time) for context and common pitfalls.
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.