How to Calculate Burn Rate (Gross & Net, With Example)
By Ricardo Lau Cooper, Senior Financial Data Analyst · LinkedIn
Burn rate tells you how fast your startup is spending its cash — and runway tells you how long that cash will last. Together they answer the question every founder and investor asks: how long can we keep going? This guide shows both formulas, a full worked example, and the mistakes that hide a cash problem until it's too late.
What is burn rate?
Burn rate is the amount of cash a company loses per month. There are two versions: gross burn is total monthly spending; net burn is spending minus revenue. Gross burn shows your cost base; net burn is the number that decides your runway.
Gross burn rate formula
Gross burn = Total monthly operating expenses
Example: a startup with $80,000 in the bank spends the following each month:
- Salaries (2 founders + 1 engineer): $15,000
- Tools and software: $800
- Marketing: $2,000
- Office and other: $1,200
- Gross burn: $15,000 + $800 + $2,000 + $1,200 = $19,000 per month
Net burn rate and runway (the numbers that matter)
Net burn = Gross burn − Monthly revenue
Runway (months) = Cash in bank ÷ Net burn
Continuing the same example, the startup earns $4,000 per month from early customers:
- Net burn: $19,000 − $4,000 = $15,000 per month
- Runway: $80,000 ÷ $15,000 = 5.3 months
Notice what revenue does: $4,000 a month in income extends runway from 4.2 months to 5.3. Small revenue changes move runway a lot when the cash pile is small.
How much runway is enough?
Most investors want to see at least 12 months of runway, and 18+ after a funding round. Below 6 months you are fundraising under pressure — and investors can tell. If your runway is shrinking, act early: cutting costs by 20% beats raising in a panic.
Common mistakes when calculating burn rate
- Using the average of good months instead of the worst recent month.
- Forgetting irregular costs: annual software renewals, taxes, equipment.
- Counting unpaid invoices as revenue before the cash actually arrives.
- Recalculating once a quarter — burn rate should be reviewed monthly.
Skip the maths — use the free calculator
Our free Burn Rate Calculator template does the formulas for you: enter your cash, expenses, and revenue, and see net burn and runway instantly. Excel and Google Sheets, in English and Spanish.
- Net burn and runway calculated automatically
- Monthly view of cash in and out
- Free — just download and use
Planning a fundraise?
Burn rate is the starting point, not the full story. The Startup Financial Model projects 3 years of revenue, costs, and cash flow — the numbers investors expect to see before they write a cheque.
See the Startup Financial Model →