How to Calculate Your Monthly Burn Rate
A 2-minute guide on calculating the money your business spends before reaching profitability.
Play Strategy Walkthrough
What is Burn Rate?
Burn Rate is the rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations. It is a measure of negative cash flow.
The Simple Formula
To calculate your gross burn rate:
$$Gross Burn = Total Operating Expenses$$
To calculate your net burn rate:
$$Net Burn = (Total Revenue) - (Total Operating Expenses)$$
Example
If your startup spends R50,000 per month on rent, salaries, and servers, and earns R10,000 per month:
- Gross Burn: R50,000
- Net Burn: -R40,000
Funders look for a net burn rate that is sustainable given your total capital. If you have R400,000 in the bank and a net burn of R40,000, you have exactly 10 months of runway. **
Steps to Implement in the Builder
- Go to the Costs & Forecasting section.
- List all your fixed costs (Rent, Salaries).
- List your variable costs (COGS).
- The builder will automatically calculate your burn rate and runway.