What Is Burn Rate?

Burn rate is the speed at which a company spends its cash reserves, typically measured as monthly spending. The term originated in the startup world, where pre-revenue or early-revenue companies live off investor funding and need to know how long their cash will last. Burn rate is equally important for established small businesses during downturns or expansion phases when cash outflows temporarily exceed inflows.

Burn rate is often paired with "runway"—the number of months of operations your current cash reserves will fund at the current burn rate. For example, if you have $50,000 in cash and a burn rate of $10,000 per month, you have a 5-month runway. Understanding this helps you set timelines for reaching profitability, closing new deals, or securing funding.

Formula

Monthly Burn Rate = (Starting Cash − Ending Cash) ÷ Number of Months

Or, more simply: Monthly Burn Rate = Total Monthly Cash Outflows (when outflows exceed inflows).

Example

A software startup begins January with $120,000 in cash and ends March with $90,000 after 3 months of operations. Monthly burn rate = ($120,000 − $90,000) ÷ 3 = $10,000 per month. If expenses remain constant, the company has 9 more months of runway ($90,000 ÷ $10,000).

Burn rate becomes more meaningful when tracked alongside revenue growth. If burn rate is stable but revenue is climbing, your runway is actually extending—a sign the business is moving toward sustainability.

Finmap lets you model burn-rate scenarios and runway forecasts, so you can test assumptions about expense cuts or revenue growth and see the impact on your cash timeline.