How to calculate burn rate
Average spending over a representative period.
1
Add total expenses
Use cash expenses, including payroll, rent and suppliers.
2
Add revenue collected
Use cash received rather than invoiced revenue if collection is slow.
3
Divide by months
Use a period long enough to smooth one-off payments.
What does this tool do?
Burn rate is the pace at which a company consumes cash. Gross burn counts total spending, while net burn subtracts revenue. Averaging over several months smooths one-off payments and gives a more stable planning figure.
The Formula
Gross burn = Expenses ÷ Months; Net burn = (Expenses − Revenue) ÷ MonthsFrequently Asked Questions
What is the difference between gross and net burn?
Gross burn is total cash spent per month. Net burn subtracts revenue, so it measures how much of the cash balance is actually consumed.
Should I use one month or several?
Use at least three to six months. A single month may include annual insurance, tax payments or a large purchase that is not representative.