Startup finance guide
Burn rate and cash runway, explained
This calculator estimates monthly net burn from the change in cash over a defined period. It then divides ending cash by positive monthly burn to estimate runway at the same pace.
Use several complete months when possible. A single month can be distorted by annual insurance, tax payments, equipment purchases, delayed customer collections, or a new funding round.
Gross burn rate
The total cash operating expenses paid during a month, without subtracting cash receipts.
Net burn rate
Operating cash outflows less operating inflows. This calculator approximates it from cash-balance changes only when financing and other exceptional movements are accounted for.
Cash runway
Ending cash divided by average monthly net burn, assuming the recent pace continues.
Worked example
From cash balance to runway
A startup begins a three-month period with $250,000 and ends with $190,000. It used $60,000 in cash, or an average of $20,000 per month.
At the same pace, $190,000 represents about 9.5 months of estimated runway. Planned hiring, collections, financing, and one-time costs can materially change that estimate.
Source checks
Common burn rate mistakes
- 01
Mixing cash balances from different bank accounts or entities.
- 02
Using a period that includes financing proceeds, owner contributions, or transfers without adjusting for them.
- 03
Treating a one-time expense or delayed collection as a permanent monthly pattern.
- 04
Reading runway as a forecast without considering planned hiring, revenue changes, or debt payments.
Frequently asked questions
Startup burn rate FAQ
How do you calculate startup burn rate?
For an average monthly net burn estimate, subtract ending cash from starting cash, then divide the decrease by the number of complete months in the period. This balance-change method assumes the balances cover the same accounts and are adjusted for financing and other exceptional cash events. If cash increased, the calculator shows a negative net burn.
How do you calculate cash runway?
When average monthly net burn is positive, divide the ending cash balance by that burn rate. Runway is not applicable when net burn is zero or negative. Any result assumes the recent burn rate continues.
Should I use gross burn or net burn?
Gross burn helps explain the operating cost base. Net burn shows how quickly cash is actually declining after operating inflows. Many planning discussions use both.
Is a longer runway always better?
Not automatically. A longer runway can provide flexibility, but the right spending level depends on milestones, growth quality, financing plans, and the risks facing the business.