What is Burn Rate?
Also known as: cash burn, net burn, gross burn
Burn Rate is the rate at which a company spends its cash reserves, usually expressed per month. Net burn is spend minus revenue; gross burn is total spend.
What is Burn Rate?
Burn rate, together with cash in the bank, determines your runway — how long you can operate before needing more capital. It's the number that governs urgency and fundraising timing.
How to calculate Burn Rate
Gross Burn = total monthly cash out
Worked example
You spend $300,000 a month and collect $180,000 in cash. Net Burn = $300,000 − $180,000 = $120,000/month. Gross burn is $300,000.
What's a good Burn Rate?
There's no universal target; burn should be justified by growth. Investors increasingly favor efficient burn — judged via burn multiple (net burn ÷ net new ARR) under ~1.5.
Frequently asked questions
Net burn vs gross burn?
Gross burn is everything you spend. Net burn subtracts revenue, showing how fast reserves actually shrink. Net burn drives runway.
What is the burn multiple?
Net burn divided by net new ARR. Under 1 is exceptional, 1–1.5 is great, 1.5–2 is okay; above 2 signals inefficient growth.