Why use a burn rate calculator?
Knowing your burn rate gives you a clear picture of your finances so you can plan instead of react.
- Control overspending. See how quickly your cash is going out so you can manage your resources before a shortfall hits.
- Judge sustainability. Know how long your business can keep running without new cash coming in.
- Plan ahead. Use your burn rate and runway to make informed decisions about fundraising, investment, and budgeting.
- Run a financial health check. Get a clear, data-driven view of where your money is going.
How to calculate burn rate
Burn rate is the average amount of cash your business spends each month. The formulas are:
Burn Rate per Month = (Starting Balance - Ending Balance) / Number of Months
Cash Runway = Ending Balance / Burn Rate per Month
The calculator does both for you. Enter your three numbers and it returns your monthly burn rate and your cash runway in months.
Understanding burn rate and cash runway
A few related numbers give you a fuller picture of your cash health:
- Burn rate: how fast you are spending cash each month.
- Cash runway: how many months your business can keep going at the current burn rate before the cash runs out.
- Revenue growth rate: how much your revenue is rising or falling, measured monthly or yearly.
- Gross margin ratio: how much profit a product or service earns, per unit.
- Break-even point: the point where revenue equals your total costs, including fixed costs.
Dealing with a high burn rate
A high burn rate is a warning sign. If yours is climbing, here is where to start:
- Cut unnecessary costs. Review your operating costs and remove expenses that are not pulling their weight.
- Prioritise essential spending. Protect the spend that actually drives the business, like marketing and product development.
- Tackle variable costs first. Variable costs are usually the fastest to control, so spend carefully on campaigns, travel, and production.
- Explore funding options. Consider investors, loans, grants, or crowdfunding to extend your runway while you fix the underlying spend.
How to reduce your burn rate
- List every expense and sort it into "essential" and "not essential".
- Cut spend that does not contribute to revenue.
- Avoid non-critical long-term commitments.
- Streamline your workflow and remove inefficiencies.
- Open up new revenue: new sales channels, adjusted pricing, and similar.
- Negotiate better terms with your vendors.
Tips to manage burn rate like a pro
- Keep at least six months of runway on hand.
- Track your cash flow weekly or monthly.
- Use accounting tools so your numbers are always current.
- Separate fixed and variable expenses in your plan.
- Cut recurring expenses you no longer need.
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FAQs
Subtract your ending cash balance from your starting balance, then divide by the number of months in the period. That gives your average burn rate per month, which is exactly what this calculator does.
Gross burn rate is your total monthly cash spend. Net burn rate subtracts any revenue you bring in, so it is gross burn minus monthly revenue. Net burn shows how fast your cash is actually falling.
Cash runway is how many months your business can keep operating before it runs out of money at the current burn rate. Divide your remaining cash by your monthly burn rate to get it.
There is no single safe number, it depends on your cash on hand and your revenue. A common rule of thumb is to keep at least six months of runway, so your burn rate should leave you at least that much cushion.
Cut non-essential spending, delay large or long-term commitments, negotiate better terms with suppliers, and focus on the work that brings in revenue. Small recurring savings extend runway more than one-off cuts.
A negative burn rate means your business brought in more cash than it spent over the period, so your cash balance grew. That is a healthy sign that you are cash-flow positive.
List your expenses, separate essential from non-essential, and cut what does not drive revenue. Control variable costs first, avoid non-critical long-term commitments, and review the numbers regularly.
A high burn rate with a short runway means you have limited time before you need more cash. Treat it as a prompt to cut non-essential spend, protect revenue-driving activity, and plan your next funding or growth step early.
