Burn Rate and Runway Calculator

Burn rate is how fast cash leaves. Runway is how long you have before it is gone. Both are cash measures, which means neither one cares about accrual revenue, bookings or your P&L. A company can be profitable on paper and out of cash in six weeks, and if you are billing net-60 while running payroll every two weeks, that is not hypothetical.

Gross burn versus net burn

Two different numbers, and using the wrong one is the most common mistake on this metric.

Gross burn = total cash out per month Net burn = cash out - cash in Runway = Cash on hand / average monthly net burn

Gross burn is what you spend, and it answers "what does it cost to run this company". Net burn is what you actually lose, and it is what determines runway. Investors ask for both, and when someone says "burn" without qualifying it they usually mean net. Report both: a company with $400,000 of gross burn and $350,000 of collections is a fundamentally different business from one with $50,000 of gross burn and no revenue, even though both net-burn $50,000 a month.

A sanity check that beats any model: net burn is also just the drop in your bank balance. Take the balance three months ago, subtract today's, divide by three. If that does not match your model, trust the bank and go find out why. Use a three-month average rather than last month, because one annual insurance premium or one quarterly tax payment will make a single month lie to you in either direction.

Why the simple runway figure flatters you

Cash divided by net burn assumes burn stays flat, which almost nothing does. You are hiring. Cloud costs track usage. The team that spent $120,000 last month is not the team that will spend $120,000 in nine months. When burn grows at a compounding monthly rate g, the months of runway solve out to:

Months = ln(1 + (Cash x g) / Burn) / ln(1 + g)

The effect is larger than intuition suggests. $900,000 of cash against $75,000 of net burn is 12.0 months flat. Grow that burn 5% a month and it is 9.6 months: you lost a quarter of your runway to a growth rate that looks modest on a plan. Growing collections push the other way, and the projection above applies both month by month rather than netting them into one rate.

The zero-cash date is the number that changes behaviour

Twelve months of runway is abstract. A date you can hold a plan against is not. Then subtract the time a raise actually takes, three to six months from first conversation to money in the bank in a normal market and longer in a bad one, and you get the date you have to start raising rather than the date you run out. Most founders who ran out of money did not misjudge the runway, they misjudged that gap.

Two numbers to pair with runway

Burn multiple asks what your burn is buying:

Burn multiple = Net burn / Net new ARR, over the same period

Under 1.0 is exceptional, 1.0 to 2.0 is good, above 3.0 usually means you are spending to grow something the market is not pulling on. It is a better question than runway alone, because runway asks how long you can keep going and the burn multiple asks whether you should keep going the same way. (The metric was popularised by David Sacks.)

Default alive or default dead, Paul Graham's framing, asks whether your current growth reaches profitability before the cash runs out with no new funding. If the cash line in the projection above bends up before it crosses zero, you are default alive, and a raise becomes a choice rather than a survival event.

What to do when the number is bad

Runway improves in three ways, and they are not equally fast. Cutting burn works immediately and is mostly payroll, which is the part nobody wants to touch and the only part large enough to matter at most companies. Collecting faster works in weeks and costs nothing: chasing overdue invoices, tightening terms, invoicing on the day the work is done rather than at month end. Raising more works in months and is not under your control. Founders reliably reach for the third, and the second is usually sitting in an unchased receivables balance.

$900,000 in the bank. $120,000 of cash operating expenses a month. $45,000 a month collected from customers. Burn growing 3% a month as two hires land, collections growing 8% a month.

Here collections growth outruns burn growth, so the growth-adjusted runway is longer than the flat one and the flat figure understated the position by about a month. Reverse the assumptions, 8% burn growth against 3% collections growth, and the same $900,000 lasts about 8.1 months instead: a 4.8-month swing on identical cash, driven entirely by which line is compounding faster.

That is the number worth watching monthly. Not the cash balance, which everybody already knows, and not the flat runway, which is a division problem. Which of your two growth rates is winning, and what the zero-cash month did since last month.

This is a cash projection, not a financial model. It does not handle multiple currencies, debt service or interest, cap-table or dilution effects, deferred revenue mechanics, one-off outflows such as an annual insurance premium or a tax payment, expected funding events, or working-capital swings from inventory.

It also assumes your collections estimate is right, which is the assumption that breaks first: if you are projecting cash in from invoices customers have not paid yet, the runway here is optimistic by however long they take to pay.