Free SaaS Finance Tool
Burn Rate Calculator
Enter your cash balance and monthly cash flows to see your runway, zero-cash date, and raise-by date, instantly.
What is burn rate?
Burn rate is how fast a company spends cash each month. Gross burn is total monthly cash out; net burn subtracts cash coming in. Divide cash on hand by net burn to get your runway in months.
Burn rate by the numbers
How to calculate burn rate
Three formulas cover it:
Gross burn = total monthly cash operating expenses
Net burn = gross burn − monthly cash in
Cash runway = current cash ÷ net burn
To calculate yours:
- Add up everything that leaves the bank in a typical month: payroll, rent, software, contractors. That's gross burn.
- Subtract average monthly cash coming in. Use a trailing 3-month average so one lumpy invoice doesn't distort the number. That's net burn.
- Divide your current cash balance by net burn. That's runway in months.
Worked example. A SaaS company has $1.2M in the bank, spends $250k a month, and collects $100k a month. Net burn is $150k. Runway is $1.2M ÷ $150k, or 8 months.
Now turn the months into a date, because a date is what you act on. Eight months from June 2026 puts the zero-cash date in February 2027. Subtract the six months a raise typically takes and the raise-by date is August 2026. Two months away. That's a very different sentence than "8 months of runway.
What is a good burn rate and runway?
Most startups target 18 to 24 months of runway after a raise. There's no universal "good" burn rate in dollars; what matters is burn relative to growth. A company burning $500k a month while adding $400k of net new ARR is healthier than one burning $100k with flat revenue.
By stage, the working targets: seed companies should land closer to 24 months, because the next milestone is unproven. Series A and B companies typically operate at 18 to 24, trimming toward 12 to 18 only when the path to the next raise or to profitability is clear. Below 12 months, fundraising starts competing with running the company.
For the growth-adjusted view, use the burn multiple: net burn ÷ net new ARR. Under 1.5 is generally efficient; above 2 means you're paying too much for each dollar of growth.
That tradeoff is the point. High burn is fine when growth justifies it, dangerous when growth is flat. The calculator's status badge applies the same logic.
How much runway before you raise?
Start raising about six months before your zero-cash date. A typical raise takes three to six months from first pitch to money in the bank, and you want to negotiate with runway left, not against a deadline investors can see. That's why the calculator returns a raise-by date: zero-cash minus six months.
Before you open the deck, answer Paul Graham's question: are you default alive or default dead? Default alive means that at current growth, you reach profitability on the cash you have. Default dead means you don't, so the raise is mandatory rather than opportunistic.
The combination to avoid is what Graham calls the fatal pinch: default dead, slow growth, and no time left to fix either. Investors fund momentum, not deadlines. If your status badge reads caution or critical, the work isn't polishing the pitch. It's lifting growth or cutting net burn until the math flips.
How to reduce burn rate without killing growth
The principle: cut the spend that isn't driving growth, and don't starve the spend that is. Extending runway by gutting your growth engine just means dying more slowly. Net burn has two sides, so the levers include raising cash in, not only cutting cash out.
The levers, roughly in order of impact:
- Pace hiring. Payroll is the biggest line in almost every startup's burn. Delaying three hires by one quarter often buys more runway than any other single move.
- Cut discretionary spend. Travel, events, swag, the second office. Painless first.
- Audit vendors and tooling. Unused seats and overlapping software accumulate quietly. Renegotiate annual contracts before they auto-renew.
- Lift cash in. Tighten collections, bill annually upfront, raise prices where you have pricing power. A dollar collected sooner cuts net burn as surely as a dollar saved.
The false economy to avoid: cutting sales or product capacity that's demonstrably converting. Run each cut against one question. Does this spend produce growth?
Burn rate calculator FAQs
How do you calculate burn rate?
Net burn rate = monthly cash out minus monthly cash in. Measured over a period, it's (starting cash − ending cash) ÷ number of months. Divide current cash by net burn and you get runway in months.
What is the difference between gross and net burn rate?
Gross burn is your total monthly cash spend. Net burn subtracts monthly cash coming in. Net burn shows how long your cash actually lasts, which is why investors focus on it.
What is cash runway?
Cash runway is how many months your current cash lasts at your net burn rate: current cash ÷ net burn. Add it to today's date and you have your zero-cash date.
What is a good burn rate or runway?
Most startups aim for 18 to 24 months of runway after a raise. There's no good burn rate in isolation; high burn is acceptable when growth justifies it and dangerous when growth is flat.
How much runway should I have before raising?
Start fundraising about six months before your zero-cash date. In practice that means opening the raise with 12 to 18 months of runway remaining, so you negotiate from strength.
Can a company have a negative burn rate?
Yes. If cash in exceeds cash out, net burn is negative, meaning you're cash-flow positive. In Paul Graham's terms, you're default alive: runway is no longer the constraint.
How do I reduce my burn rate?
Pace hiring first, since payroll is the biggest driver. Then trim discretionary and tooling spend, and lift cash in through collections and pricing. Don't cut the spend that's producing growth.
Stop estimating your burn rate manually
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