What is the difference between gross burn and net burn?

Gross burn is total cash spent each month. Net burn is cash spent minus revenue received. Investors typically focus on net burn because it shows the actual cash consumption rate. Example: $200K gross burn, $60K monthly revenue = $140K net burn.

What burn rate is acceptable for a startup?

There's no universal answer — burn is judged relative to growth. A startup burning $300K/month while growing 20% month-over-month may be deploying capital efficiently. The same burn with flat growth is a serious problem. Burn multiple (net burn ÷ net new ARR) is the cleaner efficiency metric.

How do I calculate my startup's monthly burn rate?

Sum all cash expenditures in the month: payroll, contractors, rent, software, marketing, legal, and everything else. Subtract all cash received from customers (collections, not recognized revenue). The result is net burn. Use bank statements or cash flow statements — not P&L, which includes non-cash items.

What is burn multiple?

Burn Multiple = Net Burn ÷ Net New ARR. It measures cash efficiency — how much you spend for each dollar of new ARR. Below 2× is good; above 3× is concerning. If you burn $300K/month and add $100K of new ARR monthly, your burn multiple is 3× — meaning you spend $3 of cash for each $1 of new ARR.

When should a startup cut burn?

Cut burn when runway drops below 12–18 months without a funded path forward, when burn multiple is above 3× and not improving, or when growth is decelerating despite high investment. Don't cut burn just because it's high — if you're growing fast and efficiently, high absolute burn may be the right decision.

Burn Rate Explained: How to Calculate Monthly Cash Burn

Calculate gross and net burn rate for startups. Understand the difference between gross and net burn, what drives burn, and how burn connects to runway.

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Gross Burn vs. Net Burn

Startups track two burn rates:

Gross burn rate: Total cash spent each month, regardless of revenue.

Net burn rate: Cash spent minus cash received from customers. This is the number most investors care about.

Net Burn = Gross Burn − Monthly Revenue

For a startup spending $250,000/month with $80,000 in monthly revenue: - Gross burn: $250,000/month - Net burn: $250,000 − $80,000 = $170,000/month

What Drives Burn

For most early-stage startups, burn breaks down roughly as:

Category	Typical Share of Gross Burn
Salaries and benefits	60–75%
Engineering contractors	5–15%
Marketing and paid acquisition	5–20%
Infrastructure and SaaS tools	3–8%
Office / facilities	2–5%
G&A (legal, finance, admin)	3–7%

Payroll is the dominant driver of burn, which is why headcount decisions have the largest impact on runway.

Burn Rate Benchmarks by Stage

There are no universal "right" burn rates — they depend entirely on the business model, team size, and growth rate. Some context:

ARR	Typical Monthly Net Burn
$0 (pre-revenue)	$20,000–$150,000
$500K ARR	$50,000–$300,000
$1M ARR	$100,000–$500,000
$3M ARR	$200,000–$1M
$5M+ ARR	$500,000–$3M+

Investors evaluate burn relative to growth: a company burning $500K/month but growing 15% month-over-month is in a very different position than one burning $500K/month with flat growth.

The Efficiency Metric: Burn Multiple

Burn Multiple = Net Burn ÷ Net New ARR added in the same period

This measures how many dollars of cash are spent for each dollar of new ARR generated.

Burn Multiple	Signal
< 1×	Extremely efficient — rare
1×–1.5×	Great
1.5×–2×	Good
2×–3×	Acceptable in early stages
> 3×	Concerning — growth is expensive relative to output

A burn multiple above 3× is a warning sign that sales efficiency is poor, churn is too high, or the growth investment isn't translating into durable revenue.

How the Calculator Works

Enter your total monthly expenses (gross burn) and your total monthly revenue received. The calculator outputs: - Gross burn rate - Net burn rate - Burn multiple (if you input new ARR added this month)

Run this calculation monthly using actual bank statements, not accrual-based accounting — you need cash outflows and inflows, not deferred revenue recognition.

When to Reduce Burn

Reducing burn is not always the right move — sometimes accelerating growth at high burn is the correct strategy with ample runway. Reduce burn when:

Runway falls below 12–18 months without a clear path to the next funding round
Growth is not responding to investment (high burn multiple)
Market conditions change (fundraising environment tightens)
Revenue growth is slowing while burn remains constant

The "default alive" exercise: at current revenue growth rate and burn rate, will the company reach cash flow breakeven before running out of money? If yes, you have strategic options. If no, you need either a funding event or burn reduction.

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Frequently Asked Questions

What is the difference between gross burn and net burn?: Gross burn is total cash spent each month. Net burn is cash spent minus revenue received. Investors typically focus on net burn because it shows the actual cash consumption rate. Example: $200K gross burn, $60K monthly revenue = $140K net burn.
What burn rate is acceptable for a startup?: There's no universal answer — burn is judged relative to growth. A startup burning $300K/month while growing 20% month-over-month may be deploying capital efficiently. The same burn with flat growth is a serious problem. Burn multiple (net burn ÷ net new ARR) is the cleaner efficiency metric.
How do I calculate my startup's monthly burn rate?: Sum all cash expenditures in the month: payroll, contractors, rent, software, marketing, legal, and everything else. Subtract all cash received from customers (collections, not recognized revenue). The result is net burn. Use bank statements or cash flow statements — not P&L, which includes non-cash items.
What is burn multiple?: Burn Multiple = Net Burn ÷ Net New ARR. It measures cash efficiency — how much you spend for each dollar of new ARR. Below 2× is good; above 3× is concerning. If you burn $300K/month and add $100K of new ARR monthly, your burn multiple is 3× — meaning you spend $3 of cash for each $1 of new ARR.
When should a startup cut burn?: Cut burn when runway drops below 12–18 months without a funded path forward, when burn multiple is above 3× and not improving, or when growth is decelerating despite high investment. Don't cut burn just because it's high — if you're growing fast and efficiently, high absolute burn may be the right decision.

Last updated 7/28/2026