Burn rate

The rate at which a company consumes cash each month.

Definition

Burn rate is the net amount of cash a business spends in a period, usually a month. Gross burn is total cash out; net burn is cash out minus cash in. Net burn is the figure that determines survival, because it accounts for revenue offsetting spend.

Why it matters

Burn rate paired with cash balance gives runway, the single most important number for any company that is not yet profitable. A burn rate that drifts upward without a matching revenue increase shortens runway silently.

Related terms

• runway
• cash flow
• operating expenses