Burn Rate Calculator
How to Use This Tool
Follow these simple steps to calculate your business's burn rate and cash runway:
- Select your primary operating currency from the dropdown menu.
- Enter your current total liquid cash reserves (only include funds available for day-to-day operations).
- Enter your total monthly fixed operating costs, including rent, salaries, and recurring software subscriptions.
- Enter your total monthly variable operating costs, such as marketing spend, inventory purchases, and shipping fees.
- Optionally enter your monthly recurring revenue to calculate net burn rate.
- Select whether to use Gross Burn (total expenses) or Net Burn (expenses minus revenue) for runway calculations.
- Click the Calculate Burn Rate button to view your detailed results.
- Use the Reset button to clear all fields and start a new calculation.
Formula and Logic
Burn rate calculations rely on two core metrics that are standard for business operations and entrepreneurship:
- Gross Monthly Burn = Total Monthly Fixed Costs + Total Monthly Variable Costs
- Net Monthly Burn = Gross Monthly Burn - Monthly Recurring Revenue
- Runway (Months) = Current Cash Reserves / Selected Burn Rate (Gross or Net)
- Runway (Years) = Runway (Months) / 12
If your Net Burn is zero or negative, your business is cash flow positive, and your runway is considered infinite as you are not depleting cash reserves.
Practical Notes
These guidelines are tailored for entrepreneurs, small business owners, e-commerce sellers, and trade professionals:
- Only include liquid cash reserves (checking accounts, money market funds) in your calculation — exclude illiquid assets like inventory, equipment, or real estate.
- Amortize quarterly or annual fixed costs (such as insurance premiums) to a monthly amount to ensure accuracy.
- E-commerce sellers should include payment processing fees, cost of goods sold, and marketplace commissions in variable costs.
- Early-stage startups typically aim for 6-12 months of runway, while established businesses may operate safely with 3-6 months of runway.
- If your net burn exceeds 20% of monthly revenue, prioritize reducing variable costs or renegotiating fixed vendor contracts before seeking external funding.
Why This Tool Is Useful
Burn rate is a critical financial metric for any business, but it is especially vital for startups, e-commerce stores, and small trade businesses operating on tight margins:
- Plan fundraising timelines: know exactly when you need to secure additional capital to avoid cash flow gaps.
- Optimize operational spend: identify if variable costs like marketing are depleting your runway faster than expected.
- Share standardized metrics with investors: provide clear, consistent burn rate and runway data during pitch meetings.
- Avoid cash flow crises: get early warnings if your runway drops below 3 months, giving you time to adjust strategy.
Frequently Asked Questions
What is the difference between gross burn and net burn?
Gross burn refers to your total monthly operating expenses, regardless of how much revenue you generate. Net burn subtracts your monthly recurring revenue from total expenses, reflecting your actual monthly cash outflow. Investors typically prioritize net burn when evaluating early-stage businesses.
Should I include one-time expenses in my burn rate calculation?
No, burn rate measures recurring monthly operational costs. One-time expenses (such as purchasing equipment, legal fees, or office renovations) should be tracked separately, as they do not reflect your ongoing cash flow pace.
How often should I update my burn rate calculation?
Update your burn rate at least once per month, or whenever you make significant changes to fixed costs, launch new marketing campaigns, or see major shifts in revenue. E-commerce sellers should update their burn rate weekly during peak sales periods like holiday seasons.
Additional Guidance
Cross-check your expense and revenue totals with your accounting software (such as QuickBooks, Xero, or Wave) before calculating runway to ensure accuracy. Use this calculator alongside your profit and loss (P&L) statements to identify trends in spending over time. If your runway is shorter than 6 months, prioritize cost-cutting measures or accelerating accounts receivable collection before pursuing external funding.