Burn Rate & Runway Calculator
Calculate how long your cash will last and track your path to profitability. Know exactly when you'll run out of money or become cashflow positive.
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Formulas Used:
- Monthly Burn = Monthly Expenses - Monthly Revenue
- Runway = Cash on Hand / Monthly Burn
- Conservative Runway assumes 20% higher burn rate
- Aggressive Runway assumes 20% lower burn rate (cost cutting)
- Cashflow Positive = Monthly Revenue ≥ Monthly Expenses
Understanding Burn Rate and Runway for Business Survival
Burn rate and runway are critical metrics for any business, but especially for startups and growing companies. They tell you exactly how long you can survive with your current cash reserves and help you make critical decisions about spending, fundraising, and growth.
What is Burn Rate?
Burn rate is the speed at which your business spends cash before becoming profitable. It's calculated as monthly expenses minus monthly revenue. A positive burn rate means you're spending more than you earn. A negative burn rate (or net positive) means you're generating cash each month. Understanding your burn rate helps you identify when you need to raise funds or cut costs.
Calculating Your Runway
Runway is simply your cash on hand divided by your monthly burn rate. It tells you how many months you have until you run out of money. For example, with $100,000 in cash and a $10,000 monthly burn, you have 10 months of runway. Most investors and advisors recommend maintaining at least 12-18 months of runway at all times.
When to Worry About Your Burn Rate
If your runway drops below 6 months, it's time to take action. Options include raising additional capital, reducing expenses, or accelerating revenue growth. The key is monitoring your burn rate monthly and watching for trends. A steadily increasing burn rate without corresponding revenue growth is a red flag that requires immediate attention.
Strategies for Extending Runway
The most effective way to extend runway is reducing burn rate. Review all expenses and cut non-essentials. Negotiate better terms with vendors. Consider deferred compensation for founders. Generate quick revenue through pre-sales or deposits. Even small monthly reductions can add months to your runway, giving you more time to reach profitability or secure funding.
How to Read Runway Bands
Runway is more useful when treated as a decision band rather than one number. More than 12 months usually gives a business room to test, improve, and fix weak channels without panic. Six to twelve months means decisions need to be prioritized and measured carefully. Fewer than six months usually means leadership should already be executing cost, pricing, financing, or revenue actions instead of only discussing them.
Growth Burn vs. Uncontrolled Burn
Not all burn is equal. Growth burn can be rational if extra spending is buying customers with acceptable payback and the business has a plan to convert that spend into durable cash flow. Uncontrolled burn is different: hiring ahead of demand, carrying bloated overhead, or spending into channels without reliable conversion data. The calculator helps surface the number, but management judgment is what decides whether that number is strategic or dangerous.
What to Review Every Month
A solid monthly burn-rate review should include cash on hand, current burn, collections timing, one-time expenses, debt obligations, payroll commitments, and the next three decisions most likely to change runway. That process matters because runway usually shortens gradually before it becomes urgent. Teams that review it monthly tend to act early; teams that avoid it often discover the problem when options are already narrow.
Frequently Asked Questions
What is burn rate?
Burn rate is the rate at which a company spends its cash reserves before generating positive cash flow. It's typically measured monthly and calculated as monthly expenses minus monthly revenue. A positive burn rate means you're spending more than you earn.
How do you calculate runway?
Runway is calculated by dividing your current cash on hand by your monthly burn rate. For example, if you have $100,000 in cash and burn $10,000 per month, your runway is 10 months. This tells you how long you can operate before running out of money.
What is a healthy burn rate for a startup?
A healthy burn rate depends on your funding and growth stage. Early-stage startups typically aim for 12-18 months of runway. A good rule of thumb is to keep monthly burn below 5-8% of your total funding. If bootstrapped, aim for profitability as quickly as possible.
How can I extend my runway?
Extend runway by reducing expenses (cut non-essential costs, negotiate with vendors), increasing revenue (accelerate sales, raise prices), securing additional funding, or generating cash through pre-sales or deposits. Even small monthly savings can add months to your runway.
What does cashflow positive mean?
Cashflow positive means your monthly revenue exceeds your monthly expenses. You've stopped burning cash and are generating surplus each month. This is a critical milestone for business sustainability and eliminates the risk of running out of money.
Should I include owner salary in burn rate calculations?
Yes, include a reasonable market-rate salary for yourself in burn rate calculations. Working for free masks the true cost of operating your business. If the business can't support your salary, it's not truly sustainable. Consider this when planning funding needs.
How often should I calculate my burn rate?
Calculate burn rate monthly as part of your financial review. Track trends over time—burn rate often increases as you scale. Update your runway calculation whenever significant changes occur (new hires, major expenses, funding rounds, or revenue milestones).
What's the difference between gross burn and net burn?
Gross burn is your total monthly expenses without considering revenue. Net burn (what this calculator shows) is expenses minus revenue. Net burn is more relevant for most businesses because it accounts for revenue offsetting costs. A business with high gross burn but strong revenue may have low or negative net burn.
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