What is Burn Rate?
Burn rate is the pace at which a startup consumes its available capital. There are two types:
Gross Burn Rate
Total monthly operating expenses without considering revenue.
Net Burn Rate
Monthly cash loss after accounting for any revenue: Net Burn = Monthly Expenses - Monthly Revenue
Why Track Burn Rate
- Determines runway and cash needs
- Signals operational efficiency
- Guides fundraising timing
- Helps with budget planning
Optimizing Burn Rate
- Prioritize essential expenses
- Negotiate better terms with vendors
- Consider remote work to reduce overhead
- Focus on revenue growth
- Hire strategically