Operations

Burn Rate

The rate at which a company spends its cash reserves each month before reaching profitability.

Burn rate is the monthly net cash outflow — the amount by which expenses exceed revenue. Gross burn counts total spending; net burn subtracts revenue, giving the true cash consumption rate. A company burning $50,000 per month in net cash is consuming $600,000 per year. Burn rate matters because it directly determines runway — how many months remain before the company runs out of money. High burn can be justified if it is producing proportionally high growth, but burn that is not driving measurable traction is the fastest way to end a company. Boards and investors monitor burn rate closely and expect founders to know it precisely, not approximately. During fundraising, burn rate determines the urgency and valuation pressure of the next round.