What is a good burn rate for a startup?

There's no universal number — it depends on stage and runway. The useful metric is runway, not burn in isolation. A common target is to keep at least 12–18 months of runway after a raise. If a round gives you $600k and you burn $40k/month net, that's 15 months, which is healthy.

What's the difference between gross burn and net burn?

Gross burn is total monthly cash going out (all expenses). Net burn is gross burn minus monthly revenue — the amount your bank balance actually drops each month. Runway is calculated from net burn, because revenue offsets some of your spending.

How do I calculate runway?

Runway in months = current cash balance ÷ net monthly burn. If you have $300,000 and your net burn is $25,000/month, your runway is 12 months. Recalculate it every month, because burn rarely stays flat.

What Is Burn Rate? A Founder's Guide to Calculating and Extending Runway

Burn rate is how fast your company spends cash. It matters because it determines your runway — the number of months before you run out of money — and runway determines almost every important decision a pre-profit startup makes.

Here are the only three formulas you need.

The three formulas

Gross burn — total cash leaving the business each month:

Gross burn = all monthly operating expenses
           = salaries + rent + software + marketing + everything else

Net burn — how much your bank balance actually drops:

Net burn = gross burn − monthly revenue

Runway — months until you hit zero:

Runway (months) = current cash ÷ net burn

A worked example: you have $300,000 in the bank. You spend $40,000 a month and bring in $15,000 in revenue.

Gross burn = $40,000
Net burn = $40,000 − $15,000 = $25,000
Runway = $300,000 ÷ $25,000 = 12 months

Twelve months is the number that should drive your planning — not the $40,000, and not the $300,000.

Why net burn is the number that matters

Founders often quote gross burn because it’s the bigger, scarier figure. But revenue is real cash that offsets spending, so runway is always calculated from net burn.

The exception: if your revenue is volatile or seasonal, model runway on a conservative revenue assumption. A SaaS startup with predictable MRR can trust its net burn. An agency with lumpy project revenue should plan closer to gross burn, because next month’s income isn’t guaranteed.

Runway is a moving number — track it monthly

Burn rate is not static. It jumps when you hire, sign an office lease, or launch a paid acquisition campaign. It drops when a contract ends or you cut a tool.

The single most useful habit is recalculating runway on the first of every month using your actual closing balance. A startup that “had 12 months of runway” in January can quietly be at 7 months by April after two hires and a marketing push — and the founders won’t notice until it’s a crisis, unless they’re tracking it.

This is exactly what a startup finance setup should surface automatically: current cash, this month’s net burn, and the resulting runway, updated as transactions come in.

The four levers that actually extend runway

When runway gets short, founders reach for spreadsheets full of small cuts. Most of those don’t move the number. Four things do:

Headcount. Salaries are usually 60–80% of burn at an early startup. Slowing or pausing hiring is the largest single lever. It’s also the hardest, which is why it’s often delayed too long.
Revenue acceleration. Pulling forward annual contracts (offering a discount for upfront annual payment) converts future revenue into present cash and directly cuts net burn.
Large fixed costs. Office space and long software contracts. Subletting, downsizing, or renegotiating these gives a permanent monthly reduction.
Timing of the raise. Runway determines when you must raise. Starting a raise with 9+ months of runway gives you leverage; starting with 3 months gives the investor leverage. Runway visibility is what lets you start early.

Cancelling a $15/month tool feels productive but changes a 7-month runway by about a day. Pausing one hire can add two months. Spend your energy on the big levers.

The mistake that kills startups

It isn’t burning too fast. It’s not knowing how fast you’re burning. Companies die when founders discover in month 10 that they have six weeks of cash, because nobody recalculated runway after the team doubled.

Track three numbers every month — cash balance, net burn, runway — and you’ll see the wall months before you hit it. That’s enough time to cut, sell, or raise. Surprise is the enemy, not spend.

The bottom line

Burn rate measures how fast you spend; runway turns that into a deadline. Calculate net burn (gross burn minus revenue), divide your cash by it, and recompute monthly. When runway gets short, pull the big levers — headcount, contract timing, fixed costs — not the small ones.

General information, not financial advice. Model your own runway against conservative revenue assumptions and review with your finance lead or accountant before major decisions.