Burn Rate Calculator

Use this free tool to calculate your company’s burn rate and runway

Burn Rate Calculator: An Explanation

Burn Rate

Burn rate is how much money a company spends each month to cover its costs. It shows how quickly cash reserves are used up, helping businesses see if they need to cut costs or increase income.

Runway

Runway is the amount of time a company has before it runs out of cash, based on how much it’s spending each month. It’s usually measured in months and helps companies plan when they might need more funding or reach profitability.

Example:

Let's say you have a startup company that’s generating $10,000 per month with the monthly operating expenses of $15,000. You also have a cash balance of $40,000 in your bank.

Monthly revenue = $10K

Monthly operating expenses = $15K

Cash balance = $40K

To calculate the burn rate based on the provided data, let’s follow these steps:
Burn Rate = Monthly Operating Expenses − Monthly RevenueSubstituting the values:
Burn Rate = $15,000 - $10,000 = $5,000

You can also calculate runway here:

Runway is the number of months the company can continue operating before it runs out of cash, calculated by dividing the current cash balance by the monthly burn rate:

Runway = Current Cash Balance / Burn RateSubstituting the values:Runway = $40,000 − $5,000 = 8 months

Why It Matters:

As a startup, you want to always keep your burn rate and runway in check, because this will help you stay in control of your cash and it will also help you make smart moves.

Here’s why:

Keeping an Eye on Cash Burn rate tells you how much money is going out the door each month. It’s like a speedometer for your spending, helping you avoid burning through funds too quickly.
Knowing Your Survival Window Runway tells you how long your cash will last. It’s your timeline for making things happen—whether it’s cutting costs, boosting revenue, or gearing up to raise more funds.
Guiding Big Decisions When you know your burn rate and runway, it’s easier to make smart calls about hiring, product launches, and marketing. You can prioritize the things that stretch your runway and drive growth.
Building a Realistic Growth Plan With a manageable burn rate, you have more time to reach milestones without scrambling for cash. Runway helps you map out a growth plan that’s realistic, not rushed.
Attracting Investors Investors want to see that you know your numbers and can keep cash under control. A solid handle on burn rate and runway shows you’re in it for the long haul, not just burning through funds.

In short, burn rate and runway help you stay grounded, make smart choices, and keep your startup moving forward sustainably.