How this instrument works
Burn rate is the average dollar amount a company's cash balance falls by each month. It is not read off a single invoice or a single payroll run — it comes from two bank balances a stretch of time apart, so it automatically nets together every inflow and outflow that happened in between: payroll, rent, software bills, customer payments received, a late-paying client, a one-off refund. That netted figure is what founders and finance teams call net burn, and it is the version this sheet computes, because two real balances are the only numbers a bank statement hands you without guesswork.
The reason boards return to this one figure is what it enables next: divide the cash still in the bank by the monthly burn rate and the result is runway, the number of months the company can keep operating at its current pace before the account hits zero. A CFO walking into a board meeting with $350,000 left and a $25,000 monthly burn is reporting fourteen months of runway, and that single number tends to set the whole agenda — whether to cut spending, hold a fundraising conversation now, or wait another quarter.
The average hides shape. A company that spent evenly across six months and one that spent nothing for five months then signed a big annual software contract in the sixth can show the identical burn rate, even though only one of them is heading into a stable seventh month. Shortening the window to one month at a time exposes that kind of lump; lengthening it smooths month-to-month noise but reacts more slowly if spending is genuinely accelerating. This figure also says nothing about why cash fell — it is a pace, not a diagnosis.
- Enter Cash at start of period, $ — the bank balance on the day you are measuring from.
- Enter Cash at end of period, $ — the balance on the later date, after that stretch of spending.
- Set Months elapsed to the number of months between those two dates, such as six for a half-year check-in.
- Read Monthly burn rate for the average cash consumed each month across that stretch.
- Divide your current cash balance by that rate on your own to see how many months of runway remain.
Worked example — $500,000 down to $350,000 in six months
A startup opens a half-year with $500,000 in the bank and closes it with $350,000, having filed six months of statements in between. Feeding those three figures into the formula gives (500,000 − 350,000) ⁄ 6, which is $150,000 spread over six months, or $25,000 of cash consumed on average every month during that stretch.
That $25,000 monthly burn rate turns the remaining $350,000 into a runway figure of $350,000 ⁄ $25,000, which is 14 months before the account reaches zero at the current pace. Fourteen months is the number that decides whether a fundraising conversation starts this quarter or can reasonably wait — most investors expect a company to begin raising with somewhere between six and twelve months of runway still on the clock, not after it has run out.
Questions
What is the difference between gross burn and net burn?
Gross burn totals every dollar that left the account in the period, before counting anything that came in. Net burn, what this calculator returns, is the actual change in the cash balance — spending minus revenue, refunds, and any cash raised in between. A company can have heavy gross burn and still show a small net burn if enough cash arrived from customers or a financing round during the same stretch.
What does a negative burn rate mean?
It means cash grew rather than shrank over the period — end cash was higher than start cash, so the formula returns a negative number. That points to a company generating more cash than it spends, whether from operating profit, a loan draw, or a funding round landing inside the window measured, and it is the state every burn calculation is ultimately trying to reach.
How do I turn this monthly rate into a runway figure?
Divide the cash currently in the bank by the monthly burn rate this sheet returns. In the worked example, $350,000 of remaining cash divided by a $25,000 monthly burn gives 14 months of runway. Runway assumes the burn rate holds steady going forward, so it is a projection built on the recent past, not a guarantee.
Why does the length of the period I choose change the answer?
Burn rate is an average, and averages absorb whatever happened to fall inside the window. A single month can be thrown off by an annual insurance bill or a delayed invoice; a full year smooths those one-off swings but reacts slowly if spending has genuinely sped up recently. Running the same balances over a few different window lengths shows whether the pace is steady or shifting.
How is burn rate different from a break-even calculation?
Break-even asks how many units or how much revenue a product needs to cover its costs — a question about unit economics that holds regardless of the calendar. Burn rate asks how fast a real bank balance is falling over actual months and says nothing about whether any single product line is profitable. A company can be far from break-even yet have a low burn rate if it is well funded, or close to break-even with a high burn rate if overheads are heavy.
Who actually tracks monthly burn rate?
Founders and finance teams pull it together before board meetings and investor updates, since it converts a bank balance into a timeline everyone in the room understands. Venture investors ask for it when sizing up whether a company needs to raise again soon, and it is one of the first figures a lender or acquirer's diligence team recalculates from raw bank statements rather than taking on trust.
References
- U.S. Small Business Administration — Calculate your startup costs
- Federal Reserve Banks — Small Business Credit Survey
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.