How to Use the Burn Rate Calculator
Our burn rate calculator helps venture-backed startups model their cash runway with precision. Unlike simple calculators that divide cash by monthly burn, this tool projects 24 months of cash flow with compounding revenue and expense growth, capital events like funding rounds, and instant visualization of when you'll hit profitability or need to raise the next round. The calculator runs entirely in your browser—your sensitive financial data never touches our servers.
Set Starting Cash
Enter your current cash on hand—this is your starting position for the 24-month projection. Include all bank balances, money market funds, and liquid investments that could be converted to cash within 30 days. Do not include accounts receivable or inventory; those are not immediately available to cover operating expenses. Most founders underestimate this number by including funds that have conditions attached.
Enter Monthly Revenue
Input your current monthly recurring revenue (MRR) or average monthly revenue for non-subscription businesses. The simulator applies your specified growth rate to project future months. Be honest here—use actual collected revenue, not booked revenue or pipeline. For SaaS, use MRR including expansion but excluding one-time professional services. Revenue partially offsets your burn, so getting this accurate matters enormously for runway calculations.
Enter Monthly Expenses
Input total monthly operating expenses including payroll (your largest cost), rent, software subscriptions, marketing spend, and all other recurring costs. Include the fully-burdened cost of employees—not just salaries, but payroll taxes and benefits too. Exclude one-time capital expenditures here; those go in as separate capital events. Most startups discover their true burn is 10-20% higher than they thought when they account for everything.
Set Growth Rates
Configure revenue growth rate and expense growth rate as monthly percentages. Revenue growth of 5% monthly compounds to about 80% annual growth. Set expense growth to model headcount increases or cost discipline. If you are planning to grow the team, your expense growth rate should reflect planned hiring. Tip: try different scenarios—aggressive growth (10% revenue, 5% expense) vs conservative (3% revenue, 2% expense) to see how they affect your runway.
Add Capital Events (Optional)
Model funding rounds, large equipment purchases, debt drawdowns, or one-time revenue events at specific months. For example, if you expect to close a Series A of $5M in month 6, add that as a positive capital event. If you plan to purchase $200K in servers in month 3, add that as a negative event. This feature lets you see exactly when you need to close funding to avoid running out of cash, accounting for the typical 3-6 month fundraising timeline.
After entering your data, the calculator reveals critical insights. You'll see your net burn rate (expenses minus revenue), your gross burn rate (total expenses before revenue offset), your runway in months, and the Burn Multiple—a key efficiency metric that shows how much you spend to generate each dollar of new ARR. The interactive chart visualizes your cash trajectory over 24 months, with clear markers showing when you cross into profitability or hit zero cash.
Use scenario modeling to stress-test your assumptions. What if revenue grows at 3% instead of 5%? What if you need to hire two more engineers next quarter? What if your Series A closes in month 8 instead of month 6? The calculator lets you adjust inputs instantly to see how sensitive your runway is to changing conditions—critical information for planning hiring decisions and fundraising timing.
Understanding Burn Rate: Net vs Gross
Burn rate measures how quickly your startup consumes cash—the speed at which your bank account shrinks each month. For venture-backed companies, understanding burn rate is existential. Run out of cash and you're dead, no matter how promising your product or how large your market opportunity. The burn rate calculation seems simple, but the devil is in the details: are you measuring gross burn or net burn, and are you accounting for all your costs?
Gross Burn Rate
Formula: Total Monthly Operating Expenses
Your total cash outflow before any revenue offset. This is what you'd burn if revenue suddenly dropped to zero. Useful for worst-case scenario planning and understanding your fixed cost structure.
Net Burn Rate
Formula: Total Expenses − Total Revenue
Your actual monthly cash consumption after revenue offsets some of your costs. This is the number that determines your real runway. As revenue grows, net burn shrinks—eventually going negative when you achieve profitability.
Most investors focus on net burn, but gross burn matters too. Net burn tells you how fast you're currently losing money, but gross burn reveals your dependency on revenue. A company with $100K gross burn and $50K revenue has $50K net burn. But if revenue dips by 50% due to churn or seasonality, net burn suddenly jumps to $75K—50% higher. Understanding both metrics helps you plan for downside scenarios and stress-testing your financial model.
The relationship between gross and net burn shows your revenue coverage ratio. If revenue covers 70% of expenses, you're in a strong position to achieve profitability with modest growth. If revenue covers only 20% of expenses, you're far from self-sufficiency and need significant scaling before profitability becomes realistic. Our calculator shows both metrics and tracks how the ratio changes over your 24-month projection, giving you early warning signs about sustainability.
Understanding your burn composition helps prioritize cost optimization. Break down your gross burn into fixed costs (rent, core team salaries, essential software) versus variable costs (contractors, performance marketing, travel). Fixed costs are harder to cut quickly but provide stability. Variable costs offer flexibility but may also represent your growth engines. When runway gets tight, knowing which expenses are truly discretionary versus essential for operations helps you make smart cuts that preserve growth potential while extending runway.
Seasonality affects burn rate in ways many founders ignore. B2B SaaS often sees slower sales in December and August. E-commerce has obvious Q4 spikes. If your revenue is seasonal but your expenses are constant, your net burn fluctuates dramatically month-to-month. A company that looks healthy with 12 months of runway in Q4 might actually have only 8 months when recalculated with realistic seasonal revenue patterns. Always model your burn using conservative assumptions for your weakest months, not your best ones.
Runway Calculation and Your Zero-Cash Date
Runway is the number of months until you run out of cash at your current burn rate. The simplest calculation divides current cash by monthly net burn: $600K cash with $50K net burn equals 12 months of runway. But this static calculation ignores the dynamic reality of startups—your revenue grows, your expenses change, and external events like funding rounds alter the trajectory. Our calculator models all of this.
Runway = Current Cash ÷ Monthly Net Burn
Example: $500,000 Cash ÷ $40,000 Net Burn = 12.5 months runway
Your "zero date" is the projected calendar date when cash hits zero. This is the single most important date in your startup's near-term planning. If your zero date is 12 months away, you need to start fundraising in month 6 to have a 6-month buffer for the fundraising process (often taking 3-6 months even for successful rounds). If your zero date is within 6 months, you're in the "danger zone" where desperation fundraising leads to bad terms or failure.
Dynamic runway modeling accounts for changing burn over time. If your revenue is growing faster than expenses, your net burn shrinks each month, extending your runway beyond the static calculation. Conversely, if you're planning to hire aggressively, your expenses might grow faster than revenue, shortening your runway. Our calculator's 24-month projection shows exactly how your runway evolves under your specific growth assumptions.
The "default alive" vs "default dead" framework matters here. If your current trajectory leads to profitability before running out of cash, you're "default alive"—you'll survive even without raising more money. If your trajectory leads to zero cash before profitability, you're "default dead" and must either raise more capital or change your trajectory. Our calculator shows which category you fall into and what changes would flip you to "default alive."
Burn Multiple: The Efficiency Metric That Matters
Burn Multiple measures how efficiently you convert cash into growth. It answers a simple question: for every dollar of new ARR you add, how much cash are you burning? The formula is Net Burn divided by Net New ARR. A burn multiple of 1.5x means you spend $1.50 to generate each new dollar of annual recurring revenue. Lower is better—and below 1.0x means you're actually cash-flow positive while growing.
In the 2021 bull market, investors tolerated burn multiples of 3-5x or higher for hypergrowth companies. The ZIRP environment (zero interest rate policy) meant capital was cheap and growth was valued above efficiency. But the 2022-2024 correction changed everything. Now, burn multiples above 2x raise red flags for investors, and companies are expected to show a path to burn multiple below 1.5x within 12-18 months.
Understanding your burn multiple helps you make better hiring and spending decisions. If your burn multiple is 3x and you're considering hiring two more salespeople, you can model whether those hires would improve or worsen your efficiency. If each salesperson generates $200K in new ARR but costs $150K fully-burdened, that's more efficient than your average. But if they only generate $100K in new ARR, they're dragging your efficiency down. Our calculator helps you model these scenarios.
Common Burn Rate Mistakes That Kill Startups
1. Underestimating True Monthly Costs
Many founders calculate burn using only obvious costs like salaries and rent, forgetting payroll taxes (7.65%+ employer-side), health insurance ($500-2,000/month per employee), 401k matching, software subscriptions that add up, contractor payments, and legal/accounting fees. The fully-burdened cost of an employee is typically 1.25-1.4x their salary. If you're using base salaries for burn calculations, you're underestimating burn by 25-40%.
2. Confusing Net and Gross Burn
Telling investors "we burn $100K/month" when you mean gross burn but they assume net burn creates dangerous misalignment. Investors calculate runway from net burn—the actual cash consumption. If your gross burn is $100K and revenue is $40K, your net burn is $60K. Using the wrong number overstates runway by 67%. Always clarify which metric you're discussing and report both in board decks.
3. Ignoring the Fundraising Timeline
Raising a round takes 3-6 months for successful companies—longer for first-time founders or difficult market conditions. If you have 12 months of runway and start fundraising at month 9, you may close the round at month 12-15 when you're almost out of cash. Start fundraising when you have 9+ months of runway, so you close with 3-6 months remaining. Desperate fundraising leads to down rounds, onerous terms, or failure.
4. Assuming Linear Growth
Revenue rarely grows in a straight line. You'll have months where a big deal closes and months where pipeline stalls. Expense growth is also lumpy—you don't add one-seventh of an employee each week; you add whole people who ramp to full productivity over months. Model scenarios with realistic assumptions about seasonality, sales cycles, and hiring ramps rather than smooth month-over-month growth.
5. Not Modeling Downside Scenarios
Your base case assumes everything goes well—but what if revenue growth slows to half your projection? What if a key customer churns? What if you can't close your next round? Prudent founders model the "what happens if things go wrong" scenario and know their contingency plan: which expenses could be cut, which hires could be delayed, and what's the minimal viable burn to extend runway. Our calculator lets you build these scenarios side-by-side.
Frequently Asked Questions
What's a good burn rate for a Series A startup?▼
There's no universal "good" burn rate—it depends on your fundraising, growth stage, and market conditions. Post-Series A companies typically burn $200K-500K/month depending on team size and go-to-market motion, while pre-seed companies might burn $30K-80K/month. What matters more than the absolute number is having 18-24 months of runway after closing the round, achieving milestones that justify the next round at a higher valuation, and maintaining a burn multiple below 2x. A company burning $300K/month but adding $200K in new ARR monthly is healthier than one burning $100K with only $20K in new ARR because the efficiency ratio is far better. The right burn rate is whatever lets you achieve product-market fit and growth milestones before needing to raise again.
When should I start worrying about our runway?▼
Start taking action when runway drops below 12 months—this is your signal to begin planning. Below 9 months, begin active fundraising outreach or cost-cutting measures. Below 6 months is the danger zone—you're likely to face difficult negotiations with investors who sense desperation, and any significant hiccups could be fatal to the company. Below 3 months is crisis mode requiring immediate and drastic action including potential layoffs. Smart founders start preparing for the next raise when they have 12-15 months left, giving them sufficient time to hit milestones that justify their next valuation and complete the often-lengthy fundraising process without desperation that leads to bad terms or failed rounds.
How do I reduce burn rate without killing growth?▼
Focus on efficiency rather than across-the-board cuts. Identify your highest-ROI activities and double down on those while cutting low-ROI spend. Often, 80% of revenue comes from 20% of activities. Reduce tool sprawl (audit software subscriptions), optimize contractor spend, pause non-critical hires, and negotiate with vendors. For marketing, focus on channels with proven payback rather than experimental spend. The best startups can extend runway 50% while maintaining 80%+ of their growth trajectory by focusing resources on what actually works.
Should I include depreciation in burn rate?▼
No—burn rate should be calculated on a cash basis, not accrual. Depreciation is an accounting concept that doesn't represent actual cash outflow. When you buy equipment for $50,000, the full $50,000 leaves your bank account immediately (or through financing payments), not spread over 5 years. Model the actual cash payment as a capital event in the month it occurs. Similarly, prepaid expenses like annual software contracts should be counted when cash leaves, not spread monthly.
How do investors evaluate our burn rate?▼
Investors look at burn rate in context of multiple factors: runway (do you have enough time to hit milestones?), burn multiple (are you spending efficiently to generate growth?), growth rate (is the burn generating proportional revenue growth?), and path to profitability (when could you become self-sustaining if needed?). In the current market, investors favor capital-efficient companies with burn multiples below 2x, runway of 18+ months post-close, and a clear story about how the investment translates to milestone achievement. Simply having low burn isn't enough—you need to show the burn is generating value through customer acquisition, product development, or market expansion. The best founders can articulate exactly what each dollar of burn produces in terms of growth metrics and milestone progress, demonstrating capital discipline while still investing aggressively in proven opportunities.
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Project 24 months of cash flow with growth scenarios, capital events, and burn multiple tracking. See exactly when you need to raise.
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