Burn Rate

Burn Rate is the rate at which a company consumes cash, usually measured monthly. Gross burn describes total operating cash outflow; net burn subtracts cash inflow.

Why it matters

Burn rate determines runway and reveals how quickly strategic choices consume financial capacity. Infrastructure, staffing, vendors, and growth programs all contribute.

Mental model

Burn is the speed at which the cash reservoir is falling. Runway is the estimated time until it is empty.

Practical considerations

• State whether a figure is gross burn or net burn.
• Separate temporary investments from recurring commitments.
• Track burn alongside growth and milestone progress.
• Review cloud and vendor costs as part of operating design.

Common mistakes

• Cutting high-leverage investment without examining outcomes.
• Ignoring delayed invoices or committed future spending.
• Comparing burn across companies without considering stage and business model.