Founder Cash Metrics

Burn Rate

How much cash your company consumes per month — the speed at which your bank balance is shrinking.

Burn rate is the rate of cash outflow over a period. Gross burn is your total monthly cash spend regardless of income. Net burn is cash in minus cash out — the actual monthly decline (or increase) in your bank balance. Net burn is the number that determines survival, because that's what your runway is calculated from.

Burn rate is deliberately a cash metric, not an accounting one. Profitability on the P&L and burn rate can point in opposite directions for months at a time — profitable companies burn cash collecting receivables, loss-making companies can be cash-positive billing annual contracts up front. Founders who only watch one of the two are flying blind: the P&L tells you if the model works, burn tells you how long you have.

Example

Your company collects $60,000 this month and spends $145,000 (payroll, cloud, rent, everything). Gross burn is $145,000. Net burn is $85,000 — that's how much the bank balance dropped. If revenue climbs to $100,000/month while spend stays flat, net burn falls to $45,000 and your runway more than doubles.

Common questions

What is the difference between gross and net burn?

Gross burn is total monthly cash outflow, ignoring income. Net burn is outflow minus inflow — the real monthly change in cash. Net burn is what you use for runway; gross burn is useful for understanding your cost base if revenue went to zero.

Is burn rate the same as net loss?

No. Net loss is an accrual accounting figure that includes non-cash items like depreciation and counts revenue when earned. Burn rate counts only cash moving. A company can post a profit and still burn cash, or post a loss while cash grows.

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