Calculate Your Burn Rate

What is Burn Rate?

Burn rate is the pace at which a company uses up its cash reserves to cover operating costs, typically measured monthly. It’s a key indicator of financial health and show how long a business can sustain itself before needing new funding or revenue growth. Startups especially track burn rate to manage runway and avoid liquidity crunches.

Why do we use it?

Businesses use it to compare product or service performance, adjust pricing strategies, and identify areas where margins can be improved. It also helps set benchmark against industry standards and provides accurate, clear figures for investors or stakeholders, making profitability analysis faster and more reliable.

How to Calculate a Burn Rate?

• Note the total cash available at the start of the chosen period.
• Identify how much cash remains at the end of that same period.
• Subtract the ending balance from the starting balance to find the total cash spent.
• Specify the duration of your analysis like monthly, quarterly, etc.
• Divide total cash spent by the number of months in that period to get the average monthly burn.
• Divide your remaining cash by the monthly burn rate to know how many months you can operate before funds run out.

Burn Rate Formula:

Burn Rate = Starting Cash−Ending Cash ÷ Number of Months