Net Burn Rate
QUICK ANSWER
Net Burn Rate is the amount of cash a business loses each month after subtracting revenue from expenses. It helps founders and investors understand how quickly the company is using its cash and how long it can survive before raising more capital.
In depth
Net Burn Rate is calculated as Total Monthly Expenses minus Monthly Revenue and reflects the actual cash outflow of the business. It is one of the most critical metrics for early-stage startups because it directly determines runway, or how long the company can operate before running out of cash. Investors evaluate burn alongside growth to assess capital efficiency—high burn may be acceptable if it drives strong revenue growth and market expansion. However, sustained high burn without traction can signal poor financial discipline. Managing burn effectively helps startups extend runway and improve fundraising outcomes.
Example
Let’s consider a real-world example of a SaaS startup that wants to calculate its monthly burn.
The startup has the following monthly numbers:
Product, salaries, and operations: $100,000
Marketing and sales: $20,000
Total expenses: $120,000
Monthly recurring revenue (MRR): $45,000
Calculate Net Burn Rate:
Net Burn = $120,000 – $45,000 = $75,000
If the startup has $750,000 in the bank:
Runway = $750,000 ÷ $75,000 = 10 months