EuroCalc

What is Burn Rate?

Burn rate is the speed at which a company — typically an unprofitable startup — spends its cash reserves each month, measuring the pace of cash consumption.

Gross burn is total monthly cash outflow; net burn is the same minus any revenue received. Investors monitor burn alongside runway to judge whether a startup will reach profitability or its next financing round before running out of cash.

Sustainable burn is justified when each franc spent reliably generates more than a franc of future enterprise value — through customers, product, or strategic position. Uncontrolled burn is the classic killer of venture-backed companies.

Formula
Net Burn Rate = Monthly Cash Out − Monthly Cash In
Example

A SaaS startup spends CHF 350k per month on salaries, hosting and marketing while collecting CHF 100k in subscriptions — net burn is CHF 250k per month.

Related terms

Runway

Runway is the number of months a business — usually a startup — can continue operating at its current burn rate before it runs out of cash.

Cash Flow

Cash flow is the net amount of cash moving into and out of a business during a period, measuring the actual liquidity created or consumed rather than accounting profit.

Operating Expenses (OpEx)

Operating expenses are the ongoing costs a business incurs to run its day-to-day operations — including salaries, rent, utilities, marketing and software — expensed in the period they occur.

Free Cash Flow

Free cash flow (FCF) is the cash a business generates from operations after deducting the capital expenditures needed to maintain or expand its asset base — the cash truly available to shareholders, lenders and reinvestment.

Frequently asked questions

What is the difference between gross and net burn?+

Gross burn is total spending; net burn deducts revenue, showing the true cash gap.

How is burn related to runway?+

Runway = cash on hand ÷ monthly net burn. It is the number of months before cash runs out.

Is a high burn always bad?+

Not if growth justifies it — but it raises the bar for execution and timing of the next funding round.