Business finance glossary
Burn rate
The monthly rate at which a business spends its cash reserves — and the metric that determines how long the runway lasts.
Burn rate is the monthly rate at which a company spends cash above and beyond any revenue it generates. Gross burn rate is total monthly cash expenses. Net burn rate is gross burn minus monthly revenue — the net cash loss per month. Runway is the number of months of cash remaining at the current net burn rate: Runway = Cash balance / Net burn rate. A startup with $600,000 in the bank burning $75,000/month net has an 8-month runway. Burn rate is the key metric for determining when to raise funding, cut costs, or accelerate revenue. Profitable businesses have a negative net burn (they're accumulating cash), but the concept applies any time a business spends from reserves.