Founder Glossary · Financial Projection
The speed of cash leaving.
What it is
Burn rate is how much cash your company spends each month. It comes in two forms, and the difference matters.
Gross burn = total monthly spending
Net burn = gross burn − monthly cash coming in
An example
A company spends $30,000 a month and brings in $12,000. Its gross burn is $30,000. Its net burn is $18,000. (Illustrative figures.)
Why it matters
Net burn sets your runway: how long the money lasts. Investors also weigh burn against growth, asking how much new revenue each dollar of burn produces.
How to manage it
- Separate fixed costs from variable ones.
- Review burn every month, not every quarter.
- Tie new spending to specific milestones.
- Cut costs that do not move a key number.
Common mistakes
- Measuring accounting profit instead of actual cash.
- Forgetting annual and one-time bills.
- Treating one-time income as if it will repeat.
Related terms: Runway · Cost Structure · Break-Even Point
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