Burn Rate Calculator
Burn rate is how fast your company spends cash reserves, typically measured monthly. Understanding burn rate is critical for startup financial planning, fundraising timing, and ensuring business survival. Burn rate directly determines your runway.
How to Calculate
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Gross Burn = Total Monthly Operating Expenses
Net Burn = Total Monthly Operating Expenses - Revenue
Example:
Monthly Expenses: $150,000
Monthly Revenue: $80,000
Net Burn = $150K - $80K = $70,000/month
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Industry Benchmarks
| Burn Context | Guidance |
|---|---|
| Pre-revenue | Minimize burn, extend runway |
| Growing | Burn < 1x MRR growth |
| Scaling | Move toward profitability |
| Mature | Net burn should be zero or negative |
Interpreting Your Results
Track both gross burn (total spend) and net burn (spend minus revenue). As revenue grows, net burn should decrease. The "burn multiple" (net burn / net new ARR) should be below 2x for efficient growth.
Why This Metric Matters
Understanding Burn Rate helps you:
- Make data-driven business decisions with confidence
- Benchmark against industry standards and competitors
- Identify areas for improvement in your business model
- Communicate performance clearly to stakeholders and investors
- Set realistic goals and track progress over time
Best Practices for Accurate Measurement
1. Use consistent time periods: Compare month-over-month or quarter-over-quarter consistently 2. Include all relevant data: Ensure you capture all revenue sources and costs 3. Track cohorts separately: Analyze metrics by customer segment and acquisition date 4. Monitor trends: Single snapshots are less valuable than trends over time 5. Automate tracking: Use analytics tools to ensure consistent, accurate measurement
Every Metric From These Inputs
100 customers at $49 with 3% monthly churn and $200 CAC:
| Metric | Value | Formula |
|---|---|---|
| MRR | $4,900 | customers × ARPU |
| ARR | $58,800 | MRR × 12 |
| Annual churn | 30.6% | 1 − (1 − monthly)¹² |
| Average lifetime | 33.3 months | 1 ÷ monthly churn |
| LTV | $1,633 | ARPU ÷ monthly churn |
| LTV : CAC | 8.2:1 | LTV ÷ CAC |
| CAC payback | 4.1 months | CAC ÷ ARPU |
What Good Looks Like
| Metric | Healthy | Concerning |
|---|---|---|
| Monthly churn (SMB) | Under 3% | Above 5% |
| Monthly churn (enterprise) | Under 1% | Above 2% |
| LTV : CAC | 3:1 or better | Below 1:1 |
| CAC payback | Under 12 months | Above 18 |
| Net revenue retention | Above 100% | Below 90% |
The Metric This Set Omits
Net revenue retention — expansion revenue minus churn and contraction, from existing customers only. Above 100% means the business grows without acquiring anyone, which is the single strongest signal in SaaS and the one that most affects valuation. It cannot be derived from the inputs above because it needs upgrade and downgrade data.