Burn rate and runway calculations

Burn rate measures how quickly a company spends its cash reserves, typically calculated monthly. Gross burn includes all expenses, while net burn subtracts revenue. Runway indicates how many months of operation remain before running out of cash, calculated by dividing cash reserves by monthly burn rate.^[1]

A startup with $1 million in bank and $100,000 monthly burn has 10 months of runway. This timeline determines when you need additional funding or must reach profitability. Extending runway involves either reducing burn (cutting costs, freezing new hires, etc.) or increasing revenue (by accelerating growth by aggressive marketing, adopting new revenue streams etc.).

Balance growth investments against runway constraints to ensure sustainable development without risking cash depletion.