Burn Rate
The rate at which a company spends money in excess of income, typically measured monthly.
Why it matters
Burn rate determines how long your company can survive before needing additional funding. It's the foundation for calculating runway and making hiring decisions.
Formula
Subtract monthly revenue from total monthly expenses. A positive number means you're burning cash. A negative number means you're cash-flow positive.
Calculator
What's a good Burn Rate?
Acceptable burn depends on growth rate and funding. Rule of thumb: burn rate should decrease as a percentage of revenue over time.
Related metrics
Runway
FinanceThe number of months a company can continue operating at its current burn rate before running out of cash.
Growth Rate
FinanceThe percentage increase in revenue over a specific period, typically measured month-over-month or year-over-year.
GM
FinanceThe percentage of revenue remaining after subtracting the cost of goods sold (COGS), showing profitability before operating expenses.