How to use the burn rate and runway calculator
- Enter your cash on hand, your monthly cash spending and the monthly cash coming in from customers. Enter 0 for cash in if the business has no sales yet.
- Leave the starting date as today, or change it, to get an estimated date when the cash would run out. Clear it if you do not want a date.
- Read gross burn (what you spend each month), net burn (spending minus cash coming in) and the runway in months.
- Use the table to see how the runway changes if spending were 10 or 20 percent lower or higher.
Formula
Gross burn = monthly cash spending
Net burn = monthly cash spending - monthly cash coming in
Runway (months) = cash on hand / net burn
If cash coming in is at least as large as spending, net burn is zero or negative and there is no runway to run out. The cash-out date counts months at an average of 30.4375 days.
A small company with $120,000 in the bank
The company spends $25,000 a month and collects $10,000 a month from customers. Gross burn is $25,000 and net burn is $25,000 - $10,000 = $15,000. The runway is $120,000 / $15,000 = 8 months.
If spending fell by 20 percent to $20,000, net burn would be $10,000 and the runway 12 months. If spending rose by 20 percent to $30,000, net burn would be $20,000 and the runway 6 months. From a start date, 8 months is about 244 days.
Gross burn and net burn
Gross burn is everything the business pays out in a month. Net burn is what is left after subtracting the cash that comes in. It is net burn that drains the bank balance, so it is the figure that sets the runway. A business can have a large gross burn and still have a small net burn if sales cover most of it.
Use cash figures rather than accounting profit. A customer who has been invoiced but has not paid yet does not add cash, and a bill paid in advance leaves the bank before it appears as an expense.
What the runway does not show
The runway assumes spending and cash coming in stay level. In practice both change, and a runway that looks long can shorten quickly after a hire or a slow quarter. Treat the table of scenarios as a prompt to ask what you would do at each point.
For a household version that adds investment returns and rising costs, use the financial runway calculator. To project cash month by month, try the cash flow forecast calculator, and to estimate what it costs to launch, the startup cost calculator.
Assumptions and limits
- Monthly spending and monthly cash coming in are typical figures and stay level.
- Cash on hand is the money you can actually spend, not money that is committed or restricted.
- The cash-out date is an estimate that converts months to days at 30.4375 days a month.
- Interest, taxes, financing and one-time costs are not modeled.
Frequently asked questions
How do you calculate burn rate?
Gross burn is your total monthly cash spending. Net burn subtracts the cash you collect each month. Divide your cash on hand by net burn to get the number of months you can keep going.
What is the difference between gross burn and net burn?
Gross burn counts only what you spend. Net burn counts what you spend minus what comes in. A company with $25,000 of spending and $10,000 of cash in has a gross burn of $25,000 and a net burn of $15,000.
What if my net burn is zero or negative?
Then cash coming in covers your spending and your balance is not falling, so there is no runway to run out. The tool says so instead of showing an infinite number.
How long should my runway be?
That depends on your plans, how quickly you could raise money or cut costs, and how predictable your income is. The tool reports your runway but does not rate it as long or short.