Burn Rate Calculator
This tool helps you calculate your business's monthly burn rate and estimate your runway based on your current expenses and cash on hand.
Your **burn rate** is the speed at which your company spends its cash. It's typically measured on a monthly basis. Understanding your burn rate is crucial for managing finances and predicting how long your current funds will last (your **runway**).
Calculate Your Burn Rate
Understanding Burn Rate & Runway
What is Burn Rate?
Burn rate is the speed at which a company consumes its cash reserves. It's a vital metric for startups and businesses, especially those not yet profitable. It tells you how much cash leaves the business over a set period, usually a month.
How is Monthly Burn Rate Calculated?
The basic formula for calculating burn rate over a specific period is:
Burn Rate Per Period = Total Cash Outflow / Number of Periods
To get the standard **Monthly Burn Rate**, we convert the rate per your input period into a rate per month:
- If your period is in **Months**: Monthly Burn Rate = Total Outflow / Number of Months
- If your period is in **Weeks**: Monthly Burn Rate = (Total Outflow / Number of Weeks) * (Approx. 52 weeks / 12 months)
- If your period is in **Days**: Monthly Burn Rate = (Total Outflow / Number of Days) * (Approx. 365.25 days / 12 months)
This calculator performs the conversion to give you the standard monthly figure.
What is Runway?
Your runway is the amount of time (usually measured in months) your business can survive before running out of cash, assuming your current burn rate remains constant.
The formula for Runway is:
Runway (in months) = Total Cash on Hand / Monthly Burn Rate
This calculation requires knowing your current cash balance, which is why it's an optional input in the calculator.
Example Calculation (Basic Monthly)
EX: Your business spent $20,000 in the last month.
Monthly Burn Rate = $20,000 / 1 Month = $20,000 per month.
If you had $100,000 cash on hand:
Runway = $100,000 / $20,000 per month = 5 months.
Burn Rate Examples
Click on an example to see the scenario:
Example 1: Simple Monthly Burn Rate
Scenario: A startup's total expenses last month were $25,000.
Inputs: Total Expenses = $25,000, Period Duration = 1, Period Unit = Months.
Calculation: Monthly Burn Rate = $25,000 / 1 = $25,000.
Result: Monthly Burn Rate = $25,000.
Example 2: Burn Rate from Weekly Expenses
Scenario: A small team spent $6,000 over the last 4 weeks.
Inputs: Total Expenses = $6,000, Period Duration = 4, Period Unit = Weeks.
Calculation: Burn Rate Per Week = $6,000 / 4 = $1,500 per week. Monthly Burn Rate ≈ $1,500 * (52 / 12) ≈ $1,500 * 4.333 ≈ $6,500.
Result: Monthly Burn Rate ≈ $6,500.
Example 3: Burn Rate from Quarterly Expenses
Scenario: A business spent $90,000 in the last quarter (3 months).
Inputs: Total Expenses = $90,000, Period Duration = 3, Period Unit = Months.
Calculation: Monthly Burn Rate = $90,000 / 3 = $30,000.
Result: Monthly Burn Rate = $30,000.
Example 4: Calculating Runway
Scenario: Monthly Burn Rate is $15,000, and current cash on hand is $75,000.
Inputs: Total Expenses = $15,000, Period Duration = 1, Period Unit = Months, Cash on Hand = $75,000.
Calculation: Runway = $75,000 / $15,000 = 5 months.
Result: Monthly Burn Rate = $15,000, Runway = 5 months.
Example 5: High Burn Rate & Short Runway
Scenario: Monthly Burn Rate is $50,000, and cash on hand is $100,000.
Inputs: Total Expenses = $50,000, Period Duration = 1, Period Unit = Months, Cash on Hand = $100,000.
Calculation: Runway = $100,000 / $50,000 = 2 months.
Result: Monthly Burn Rate = $50,000, Runway = 2 months.
Example 6: Low Burn Rate & Long Runway
Scenario: Monthly Burn Rate is $8,000, and cash on hand is $240,000.
Inputs: Total Expenses = $8,000, Period Duration = 1, Period Unit = Months, Cash on Hand = $240,000.
Calculation: Runway = $240,000 / $8,000 = 30 months.
Result: Monthly Burn Rate = $8,000, Runway = 30 months.
Example 7: Calculating from Daily Expenses
Scenario: Expenses over 30 days were $12,000.
Inputs: Total Expenses = $12,000, Period Duration = 30, Period Unit = Days.
Calculation: Burn Rate Per Day = $12,000 / 30 = $400 per day. Monthly Burn Rate ≈ $400 * (365.25 / 12) ≈ $400 * 30.4375 ≈ $12,175.
Result: Monthly Burn Rate ≈ $12,175.
Example 8: Adjusting for Revenue (Net Burn)
Scenario: Total expenses last month were $30,000, but the company also had $10,000 in revenue. (Calculate Net Burn Rate).
Inputs: Total Expenses = $30,000 - $10,000 = $20,000 (Net Outflow), Period Duration = 1, Period Unit = Months.
Calculation: Monthly Net Burn Rate = $20,000 / 1 = $20,000.
Result: Monthly Net Burn Rate = $20,000. (Note: This calculator takes Total Outflow; subtract revenue before entering for Net Burn).
Example 9: Calculating from a 6-Month Period
Scenario: A project spent $120,000 over the last 6 months.
Inputs: Total Expenses = $120,000, Period Duration = 6, Period Unit = Months.
Calculation: Monthly Burn Rate = $120,000 / 6 = $20,000.
Result: Monthly Burn Rate = $20,000.
Example 10: Runway Calculation from Non-Monthly Data
Scenario: Spent $10,000 in 2 weeks. Have $50,000 cash on hand.
Inputs: Total Expenses = $10,000, Period Duration = 2, Period Unit = Weeks, Cash on Hand = $50,000.
Calculation: Burn Rate Per Week = $10,000 / 2 = $5,000 per week. Monthly Burn Rate ≈ $5,000 * (52 / 12) ≈ $21,666.67. Runway ≈ $50,000 / $21,666.67 ≈ 2.31 months.
Result: Monthly Burn Rate ≈ $21,666.67, Runway ≈ 2.31 months.
Frequently Asked Questions about Burn Rate
1. What is burn rate?
Burn rate is the speed at which a company spends its cash reserves over a specific period, usually calculated monthly. It indicates how quickly a company is losing money.
2. Why is burn rate important?
It's crucial for managing finances, forecasting cash flow, and determining your runway – how long your business can operate before needing more funding or becoming profitable.
3. What is gross burn rate vs. net burn rate?
Gross burn rate is the total operating expense outflow. Net burn rate is the total cash outflow minus any cash inflow (revenue). Net burn gives a clearer picture of how quickly cash reserves are depleting.
4. How do I reduce my burn rate?
Reducing burn rate involves cutting costs (salaries, rent, marketing, etc.), increasing efficiency, or increasing revenue (though this affects net burn, not necessarily gross burn).
5. What is runway?
Runway is the amount of time (typically in months) a company can continue operating based on its current cash reserves and its current net burn rate.
6. How are burn rate and runway related?
They are directly related. Your runway is calculated by dividing your total cash on hand by your monthly net burn rate. A higher burn rate or lower cash balance shortens the runway.
7. Is a high burn rate always bad?
Not necessarily. A high burn rate can be acceptable or even necessary for rapid growth, but it requires a clear plan for future funding or profitability and careful monitoring of runway.
8. How often should I calculate my burn rate?
It's best practice to calculate and review your burn rate monthly as part of your financial reporting. Changes in expenses or revenue will impact it.
9. Can I use this calculator for non-monthly periods?
Yes, you can enter expenses over any number of days, weeks, or months. The calculator will convert this into the standard monthly burn rate for you.
10. What currency does the calculator use?
The calculator is unit-agnostic. Simply enter your total expenses and cash on hand in your chosen currency (e.g., USD, EUR, GBP), and the results will be in the same currency.
