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Burn Rate Calculator Guide
Burn rate is how fast you're consuming cash. Runway is how long that cash lasts. Together they answer the only question that ultimately matters for an unprofitable business: how long have we got?
Net burn = Cash out − Cash in
Runway = Cash on hand ÷ Net burn
$600,000 in the bank burning $50,000 net a month is 12 months of runway.
Gross Burn vs Net Burn
Gross burn is everything going out, ignoring revenue. Net burn subtracts what's coming in. Net is the number that determines runway; gross tells you your exposure if revenue disappeared tomorrow.
Both matter. A company with $80,000 gross burn and $30,000 revenue has a $50,000 net burn — 12 months of runway. If that revenue is one contract that doesn't renew, runway is really 7.5 months. Investors ask about both for exactly this reason.
Cash In Means Collected, Not Invoiced
This is where runway calculations quietly lie. Revenue you've booked but not banked doesn't pay salaries. A business with $200,000 in receivables and $10,000 in the bank is in trouble regardless of what the P&L says.
Burn rate is a cash metric. Use bank movements, not accounting revenue — profitable companies run out of money all the time, and this gap is how.
The 18-Month Rule
Conventional wisdom says raise when you have 12–18 months of runway. The logic is practical: fundraising takes three to six months of full attention, and you need to negotiate from a position where walking away is possible.
Under six months, the terms available get considerably worse, because the other side can see the clock too. The worst time to raise is when you need it.
Growth Changes the Picture
Static runway assumes revenue never grows, which is usually pessimistic for a working business. If revenue grows 10% a month against flat costs, net burn shrinks every month and runway stretches well beyond the naive calculation — sometimes to the point where you reach break-even before the cash runs out.
Enter a growth rate to see when that happens. But be honest about the rate: assuming growth that hasn't happened yet is how plans meet reality badly.
Cutting Burn
Most of it is payroll in most companies, which is why cuts are painful and why founders delay them past the sensible point. The others: renegotiate contracts and annualise them, cut unused software, delay hires rather than reversing them later, and chase collections — money already earned is the cheapest money available.
Check your cash cushion against our emergency fund calculator for the personal equivalent.
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