1. What is Burn Rate Percentage?

Burn Rate Percentage is a financial metric that measures the rate at which a company is spending its cash reserves relative to its total cash balance. It indicates how quickly a company is consuming its available funds.

2. How Does the Calculator Work?

The calculator uses the Burn Rate Percentage formula:

Where:

• \( \text{Monthly Burn} \) — Total monthly cash expenditure ($)
• \( \text{Cash Balance} \) — Total available cash reserves ($)

Explanation: This calculation shows what percentage of your cash reserves you're burning through each month, helping you understand your financial runway.

3. Importance of Burn Rate Calculation

Details: Monitoring burn rate percentage is crucial for startups and businesses to manage cash flow, determine financial runway, and make informed decisions about fundraising, cost-cutting, or growth strategies.

4. Using the Calculator

Tips: Enter your total monthly cash expenditure and current cash balance in dollars. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good burn rate percentage?
A: Generally, a burn rate below 10-15% is considered healthy, while rates above 20-25% may indicate financial stress and limited runway.

Q2: How does burn rate percentage relate to runway?
A: Runway (in months) = 100 / Burn Rate %. A 20% burn rate gives 5 months of runway, while a 10% burn rate gives 10 months.

Q3: Should burn rate include all expenses?
A: Yes, monthly burn should include all operating expenses - salaries, rent, marketing, R&D, and other cash outflows.

Q4: How often should burn rate be calculated?
A: Monthly calculation is recommended for active monitoring, with quarterly deep dives for strategic planning.

Q5: What actions should be taken for high burn rates?
A: Consider cost reduction, revenue acceleration, fundraising, or strategic pivots to extend financial runway.