Startup Essential

Burn Rate Calculator

What Is This Calculator?

Burn rate is the speed at which a company spends its cash reserves before reaching profitability. There are two measures: gross burn rate (total monthly cash outflow regardless of revenue) and net burn rate (monthly cash outflow minus monthly cash inflow). Net burn is the number that actually determines how long your company can survive. If you spend $75,000 per month and bring in $20,000, your gross burn is $75,000 and your net burn is $55,000. With $500,000 in the bank, you have roughly 9 months before the lights go off. Every venture-backed board meeting opens with this number. Every investor term sheet is sized around it. And yet a surprising number of founders track it loosely or not at all, relying on a general sense of "we have enough" until they suddenly do not. The danger is not the burn rate itself — spending money to grow is rational — but spending money without knowing exactly when you run out. The companies that die from cash problems rarely die because they could not have raised more or cut costs. They die because they realized too late. Sequoia Capital's famous "RIP Good Times" memo warned founders that burn rate awareness is not optional — it is existential. Track it weekly, not monthly, and make sure every person on the leadership team knows the number.

How to Use This Calculator

Enter Total Monthly Expenses

Enter Monthly Revenue

Enter Your Cash Balance

Key Concepts

Gross Burn Rate

Total monthly cash expenditure before accounting for any revenue. Useful for worst-case planning: if all revenue disappeared tomorrow, gross burn is your actual monthly cost.

Net Burn Rate

Monthly expenses minus monthly revenue. This is the number that determines runway. A company with $100K gross burn and $80K revenue has a net burn of only $20K — a much healthier position than gross burn alone suggests.

Default Alive vs. Default Dead

Paul Graham's framework. If your revenue growth rate will exceed your expense growth rate before you run out of cash, you are "default alive." If not, you are "default dead" and need to either cut costs or raise capital.

Burn Multiple

Net burn divided by net new ARR. Under 1x is excellent. Between 1-2x is acceptable for growth-stage. Above 2x signals inefficient spending. David Sacks popularized this metric as a more useful alternative to the "Rule of 40."

Payroll Ratio

The percentage of total burn attributable to salaries, benefits, and payroll taxes. For most startups this is 60-75%. Below 50% suggests overspending on non-people costs. Above 80% may mean hiring ahead of revenue.

Expert Insights

Set up a weekly burn rate dashboard tracking gross burn, net burn, and months of runway. Share it with your co-founders and board. Companies that get blindsided by cash crunches are almost always those where only one person was watching the bank balance.

Frequently Asked Questions

It depends on stage, funding, and growth rate. Benchmarks: pre-seed $20K-$50K/month, seed $40K-$100K, Series A $100K-$300K, Series B $250K-$750K. The key metric is burn multiple (net burn / net new ARR). Below 1.5x is healthy; above 3x is a warning sign regardless of stage.

Burn rate is a cash-flow metric — actual cash leaving your bank account. Operating expenses is an accounting metric that includes non-cash items like depreciation and stock-based compensation, and may exclude cash outflows like loan principal payments. For startup survival planning, cash-based burn rate is what matters.

Calculate two versions: your steady-state burn rate excluding one-time costs (for runway planning) and your actual cash outflow including one-time costs (for cash management). If you just bought $50,000 of equipment, that cash is gone, but it should not inflate your ongoing monthly burn estimate.

Weekly for the dashboard, monthly for the detailed analysis. If you are below 6 months of runway, shift to weekly detailed tracking. The number changes as you hire, sign contracts, or lose customers.

You exhaust your cash and face three options: raise emergency funding at unfavorable terms, make drastic cuts including layoffs, or shut down. The median startup that runs out of cash had about 2-3 months of warning if the founders were tracking burn carefully. Most were not.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.