1. What Is Burn Rate?

Burn rate is a key financial metric that measures how quickly a company is spending its cash reserves. It represents the rate at which a company is losing money, typically expressed as monthly cash outflow.

2. How Does the Calculator Work?

The calculator uses the burn rate formula:

Where:

• \( \text{Monthly Expenses} \) — Total monthly operating costs ($/month)
• \( \text{Cash Runway} \) — Number of months until cash runs out (months)

Explanation: This calculation helps businesses understand their cash consumption rate and plan accordingly for fundraising or cost reduction.

3. Importance of Burn Rate Calculation

Details: Monitoring burn rate is crucial for startups and businesses to ensure financial sustainability, plan fundraising activities, and make informed decisions about spending and growth strategies.

4. Using the Calculator

Tips: Enter your total monthly expenses in dollars and your cash runway in months. Both values must be positive numbers to calculate an accurate burn rate.

5. Frequently Asked Questions (FAQ)

Q1: What is a good burn rate for a startup?
A: It depends on the company's stage and funding, but generally, startups should aim for a burn rate that gives them 12-18 months of runway.

Q2: How is burn rate different from cash flow?
A: Burn rate specifically measures cash outflow, while cash flow considers both incoming and outgoing cash movements.

Q3: When should I be concerned about my burn rate?
A: When your cash runway drops below 6 months, or if your burn rate is increasing without corresponding revenue growth.

Q4: Can burn rate be negative?
A: Yes, a negative burn rate means the company is generating more cash than it's spending, indicating profitability.

Q5: How often should burn rate be calculated?
A: Monthly calculation is recommended for most businesses, with more frequent monitoring during critical periods.