All terms
Finance
Burn rate
The rate at which a company is using up its cash reserves, typically expressed as a monthly figure.
In plain English
How fast you're losing money. There's gross burn (everything you spend) and net burn (gross minus revenue).
Example
Salaries + software + ads = $40,000/mo gross. Revenue = $15,000/mo. Gross burn = $40k. Net burn = $25k.
Formula
Gross burn = total monthly outflows Net burn = gross burn − monthly revenue
Why it matters
Determines runway, which determines your strategic options. Net burn is the one investors care about; gross burn is what you'd cut from if revenue dropped.
Common mistakes
- Reporting net burn while quietly hoping the revenue continues — model both scenarios
- Conflating monthly burn with annual run-rate burn (multiply correctly)