Definition
What is Burn Rate?
The net cash a business loses per month when expenses exceed revenue.
Burn rate is monthly cash out minus monthly cash in. Gross burn counts total expenses; net burn subtracts revenue. Net burn is what determines runway: cash balance divided by net burn equals the months a business can operate before running out of money. Burn is measured in cash actually moved, not booked revenue.
Formula
Net Burn = Monthly Expenses − Monthly RevenueExample
A business with $15,000 in monthly expenses and $10,000 in monthly revenue has a $5,000/month net burn. With $50,000 in the bank, that is 10 months of runway.