Burn Rate
Net cash outflow per month.
Overview
Burn rate is net monthly cash outflow. It shows how quickly you consume cash relative to inflows.
Burn rate is net monthly cash outflow when spending exceeds cash inflow.
Definition
Track gross and net burn and monitor the trend. Clear visibility aligns hiring, pricing, and fundraising decisions with reality.
Burn rate is net monthly cash outflow when spending exceeds inflows. Monitor both gross and net burn, and track the trend to understand whether investments are sustainable. Clear visibility into burn helps plan hiring, pricing changes, and fundraising.
Formula
Use cash basis.
Compute cash outflows minus cash inflows on a cash basis. Track both gross and net burn.
Burn rate = Cash outflows − Cash inflows
Example
$150k out, $90k in → $60k burn.
Provide a monthly cash flows example to compute net burn clearly.
Common pitfalls
Mixing gross and net burn, ignoring seasonality, or combining operating and investing flows reduces clarity.
- Mixing gross and net burn
- Ignoring seasonality
- Not separating operating vs investing cash flows
Benchmarks
Contextual; early‑stage teams often $50k–$300k/month (varies widely).
Contextual by stage. Focus on trend and sustainability rather than fixed thresholds.
Notes
Tie burn planning to hiring plans, margins, and cash forecasts.
- Track trend month‑over‑month
- Tie burn planning to hiring and COGS assumptions
Related terms
Burn rate connects to runway and pricing strategy and guides fundraising timing.
FAQs
FAQs ask about gross vs net burn and which cash flows to include.
Gross vs net?
Track both to see spending cadence.