How the Cash Burn Rate Calculator works

Burn rate is one of those startup phrases that sounds dramatic (“we’re burning money!”), but it’s really just cash-flow math. The goal is to estimate how quickly your cash balance decreases given how much money comes in and how much goes out each month. This calculator uses a founder-friendly model that balances accuracy with simplicity.

We start with your cash on hand and then adjust it for any one-time items. Think of these as “cash events” that happen once, not every month: a grant, a tax refund, a contract prepayment, a lawyer bill, new equipment, a security deposit, or an annual insurance premium paid upfront.

Adjusted cash = Cash on hand + One-time inflow − One-time outflow

Founders often mix up “gross” and “net” burn, so here’s the clean definition:

• Gross burn is simply your monthly expenses. It answers: “How much cash leaves the business each month no matter what?”
• Net burn is expenses minus revenue. It answers: “How much do we lose per month after we collect revenue?”

Gross burn = Monthly expenses
Net burn = Monthly expenses − Monthly revenue

If net burn is negative (or zero), it means you are at or above break-even. In that case, you are not “burning” cash overall, and your runway is effectively unlimited (or at least not constrained by the current monthly cash flow).

Real life is messier than a spreadsheet: customers pay late, churn happens, marketing tests flop, and surprises appear. That’s why many founders apply a safety buffer to net burn when planning. If you choose “Add safety buffer %”, we increase the net burn by your selected percentage to produce a more conservative runway.

Buffered net burn = Net burn × (1 + Buffer %)

Runway is the time your adjusted cash can support your net burn. Most investors and operators talk about runway in months:

Runway (months) = Adjusted cash ÷ Net burn

If you choose weeks, we convert using an average month of 4.345 weeks:

Runway (weeks) = Runway (months) × 4.345

• 0–3 months: “Red zone” runway. Urgent action: cut burn, raise revenue, or raise cash.
• 3–6 months: Tight runway. You have time, but you need clear milestones fast.
• 6–12 months: Healthy planning runway. Keep improving unit economics and retention.
• 12+ months: Strong runway. Great if you’re bootstrapped; still watch efficiency.

Cash burn examples (realistic scenarios)

You have $120,000 in the bank from a pre-seed round. Your expenses are $30,000/month (team + tools), and revenue is $0. Net burn is $30,000/month, so runway is:

Runway = 120,000 ÷ 30,000 = 4.0 months

That’s short. The takeaway is not “panic,” it’s “prioritize.” With 4 months, you likely need one of these: cut costs, accelerate revenue, or raise again.

You have $18,000 saved. Revenue is $6,500/month and expenses are $9,000/month (contractors + ads). You’re also about to buy a laptop for $2,000 (one-time outflow).

Adjusted cash = 18,000 + 0 − 2,000 = $16,000
Net burn = 9,000 − 6,500 = $2,500/month
Runway = 16,000 ÷ 2,500 = 6.4 months

That’s a comfortable runway for a side hustle. The smart move might be to test which marketing channel increases revenue fastest without raising expenses too much.

You have $40,000 cash. Revenue is $25,000/month and expenses are $22,000/month. Net burn is negative:

Net burn = 22,000 − 25,000 = −$3,000/month

In other words, you are generating cash. Your runway is not constrained by burn rate. Instead, your question becomes: “What is the safest way to reinvest growth profit without becoming unprofitable again?”

Suppose your net burn is $10,000/month and you have $100,000. Base runway is 10 months. But you apply a 15% buffer:

Buffered net burn = 10,000 × 1.15 = $11,500/month
Runway = 100,000 ÷ 11,500 = 8.7 months

This is why buffers are useful: they force you to plan as if reality is a little worse than your spreadsheet.

How to use burn rate for smarter decisions

Burn rate becomes powerful when you treat it as a decision tool, not a scary number. Here are practical ways founders and creators use it every week:

Keep revenue and expenses as ranges. For example, revenue might drop 10% in a “worst case” (churn or seasonality), and expenses might rise due to ad prices or surprise contractor hours. Save each scenario and compare runway. If “worst case” runway is dangerously short, you can take action before reality hits.

Runway is not just time. It’s time to hit a milestone: ship a product, reach a revenue target, close a partnership, or raise the next round. A common investor question is: “Do you have enough runway to hit the next milestone?” If not, you either reduce burn or redesign the milestone so it’s achievable.

A fast-growing business may burn cash but still be efficient. A simple way to think about this is: “How much progress do we buy with each dollar burned?” If you’re burning $30k/month but you consistently increase MRR, retention, and customer satisfaction, you might be burning in a healthy way. If you burn $30k/month and nothing improves, the burn isn’t strategic—it’s leakage.

The best operators review burn and runway on a schedule—weekly for early-stage startups, monthly for stable businesses. Treat cash like oxygen: you don’t only check it when you’re already gasping.

Frequently Asked Questions

• What is a “good” burn rate?

  It depends on your stage and goals. Pre-revenue startups may have high burn while building. Bootstrapped businesses typically keep burn low and prioritize profitability. The more important question is: “Does this burn rate buy meaningful progress toward the next milestone?”

• What’s the difference between burn rate and runway?

  Burn rate is the speed (cash lost per month). Runway is the time you have left at that speed. If burn is your “mph,” runway is how far your gas tank takes you.

• Should I use gross burn or net burn?

  Use gross burn to understand total spending and whether costs are controllable. Use net burn to estimate runway. Most runway conversations use net burn.

• What if my revenue is seasonal or paid late?

  This calculator uses an average-month approach. For seasonality, run two scenarios: a strong month and a weak month. For late payments, consider reducing monthly revenue in your inputs (or add a safety buffer) to account for delays.

• Does “cash on hand” include credit lines?

  Usually “cash” means money in the bank. Credit lines can extend runway, but they’re debt. If you want to model available credit, add it as a one-time inflow—but remember repayments later.

• Why does the runway meter cap out?

  The visual meter is just a quick shareable indicator. If runway exceeds 24 months, we show it as “very long runway” and fill the bar.