burn rate

Burn Rate

How much money a company is losing each month after revenue is counted against expenses.

When you'd see it: Startup boardrooms, fundraising conversations, layoff announcements. "We're burning $2M a month" means the company is losing that much after revenue is subtracted from spend. Burn rate is the input to runway — runway equals cash divided by burn.

Why it matters: Burn rate is the speed at which time runs out. A company with $24M in the bank and $1M monthly burn has two years; the same cash with $4M burn has six months. Investors and operators watch burn because changing it is the most controllable lever for extending runway — cut burn, gain time.

Common mistakes: Confusing burn rate with total spend. A company spending $5M per month while making $4M per month is burning $1M, not $5M. Also: "gross burn" (total spend) and "net burn" (spend minus revenue) get used interchangeably in casual conversation but mean very different things. Always ask which.

Related runway, P&L