Most founders know they should be tracking their burn rate. Very few actually do it. Not because they're irresponsible, but because every guide they find makes it sound like a CFO-level exercise involving spreadsheets, formulas, and an MBA.
It isn't. Learning how to calculate burn rate takes about five minutes. Once you know your number, everything about running your business gets clearer. How long you can operate. Whether you can afford to hire. How close you are to needing revenue.
Here's how to do it. No spreadsheet required.
What Is Burn Rate?
Burn rate is the speed at which your business is spending money. It tells you how much cash you're going through every month, and by extension, how long you have before you run out.
There are two versions of burn rate that matter.
Gross burn rate is your total monthly expenses: everything you spend, regardless of what you earn. Payroll, software subscriptions, office costs, ad spend. All of it.
Net burn rate is what most founders actually care about. It's your total monthly expenses minus your total monthly revenue. This is the real number, the gap between what you spend and what you bring in.
If your gross burn is $15,000 per month and you're bringing in $9,000 in revenue, your net burn rate is $6,000. That's the number that tells you how fast you're actually consuming your cash reserves.
The Formula
Burn rate calculation is straightforward:
Net Burn Rate = Total Monthly Expenses - Total Monthly Revenue
That's it. No complex accounting required. If you spent $8,000 last month and earned $3,000, your burn rate is $5,000 per month.
Once you have that number, you can calculate your runway:
Runway = Current Cash Balance / Monthly Burn Rate
If you have $40,000 in your bank account and your net burn is $5,000 per month, you have 8 months of runway. Eight months to reach profitability, raise funding, or cut costs before you hit zero.
Step-by-Step: Calculate Your Burn Rate Right Now
You don't need a spreadsheet. You need three numbers.
Step 1: Find your total monthly expenses. Go through last month's bank statement and add up everything you spent on the business. This includes software subscriptions (Notion, Figma, AWS, Slack), contractor or freelancer payments, advertising and marketing spend, and any tools, services, or recurring costs. If you're a solo founder with a lean operation, this number is probably somewhere between $500 and $5,000 per month.
Step 2: Find your total monthly revenue. How much money actually came into your business last month? Not invoices sent, but money received. If you're pre-revenue, this number is zero, and your net burn rate equals your gross burn rate.
Step 3: Subtract revenue from expenses. Expenses minus revenue equals your net burn rate. That's your number.
Step 4: Check your bank balance. How much money is currently sitting in your business bank account? This is your cash reserves, the fuel in the tank.
Step 5: Divide cash balance by burn rate. Cash balance divided by monthly burn rate equals your runway in months. This is the number every founder needs to know at all times.
Why Most Founders Get This Wrong
The most common mistake is calculating burn rate once and never updating it.
Burn rate changes every month. A new annual subscription renews. You bring on a contractor. Revenue dips because a client churns. Each of these shifts your number, sometimes significantly.
A founder who calculated their burn rate in January and assumes it's still accurate in March is flying blind. Markets move fast. Your number should too.
The second mistake is confusing gross burn with net burn. A business bringing in $20,000 per month in revenue might look healthy until you realize it's spending $26,000. Net burn of $6,000 per month with $30,000 in the bank gives you exactly five months of runway. That's not healthy, that's urgent.
The third mistake is ignoring the timing of cash. Revenue that's been invoiced but not yet paid doesn't protect your runway. Only cash in your account counts.
What a Healthy Burn Rate Looks Like
There's no universal answer. It depends entirely on your stage, your revenue, and your goals. But here are some practical benchmarks.
Pre-revenue solo founders: burn rate should be as close to zero as possible. Every unnecessary subscription is runway you're trading for convenience.
Early-stage startups with some revenue: net burn of $2,000 to $5,000 per month is manageable if you have 12+ months of runway. Below six months, you're in danger territory regardless of your burn number.
Funded startups: different rules apply. But even funded founders should know their burn rate. It's what determines when you'll need your next raise.
The benchmark that matters most: you should always have at least 12 months of runway visible. If you can see 12 months ahead, you have time to adjust. If you're down to 3 to 6 months, you're in reactive mode.
The Runway Problem Nobody Talks About
Calculating burn rate manually once is useful. But it doesn't help you spot the trend.
A burn rate of $4,000 per month is very different depending on whether it was $6,000 three months ago (improving) or $2,000 three months ago (deteriorating fast). The number in isolation tells you where you are. The trend tells you where you're going.
This is why tracking burn rate monthly, and watching how it changes, is more valuable than any single calculation. Founders who track their burn rate consistently make better decisions. They cut costs earlier. They push for revenue harder. They don't get surprised.
How Often Should You Calculate Burn Rate?
Once a month, minimum. The first week of every new month is the right time: you have the previous month's complete data and you're making decisions for the month ahead.
Some founders check weekly during critical periods (pre-launch, post-churn spike, approaching a fundraise). That level of visibility is worth the five minutes it takes.
The goal isn't to obsess over the number. It's to never be surprised by it.
Common Burn Rate Questions
Should I include my own salary in burn rate? Yes. If you're paying yourself anything, even a small founder salary, that's a business expense. Don't hide it from your own calculations.
What about one-time costs? Include them in the month they occur. One-time costs are real cash leaving your account. If they skew your monthly average, calculate a 3-month rolling average for better accuracy.
Does burn rate include taxes? It should. Tax payments are cash outflows. Include any tax reserves you're setting aside each month.
My burn rate varies a lot month to month. Is that normal? Yes, especially for project-based businesses. In this case, track a 3-month average rather than a single month snapshot. It gives you a much more accurate picture of your actual burn.
Start Tracking Yours Today
Now you know how to calculate burn rate. The formula is simple. The hard part is staying consistent: checking it monthly, updating it when things change, and acting on what it tells you.
If you want Cashrun to handle the calculation automatically, tracking your income, expenses, burn rate, and runway in one place, start your free trial at cashrun.co. Takes less than two minutes to set up.
Know your number. Every month. No excuses.
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