1. What is Burn Rate?

Burn Rate refers to the rate at which a company spends its cash reserves, typically measured as monthly expenses. It represents the cash outflow per period and is crucial for financial planning and runway calculation.

2. How Does the Calculator Work?

The calculator uses the Burn Rate formula:

Where:

• \( \text{Monthly Expenses} \) — Total cash outflow per month in currency

Explanation: The burn rate is simply the total monthly expenses, representing how quickly a company is spending its available cash.

3. Importance of Burn Rate Calculation

Details: Calculating burn rate is essential for startups and businesses to understand their cash flow, determine how long they can operate before needing additional funding, and make informed financial decisions.

4. Using the Calculator

Tips: Enter your total monthly expenses in your local currency. Include all operating costs such as salaries, rent, utilities, marketing, and other recurring expenses.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between gross burn rate and net burn rate?
A: Gross burn rate is total monthly cash spending, while net burn rate accounts for revenue (Gross Burn - Revenue).

Q2: How is burn rate used to calculate runway?
A: Runway = Current Cash Balance ÷ Monthly Burn Rate. This shows how many months the company can operate before running out of cash.

Q3: What is considered a good burn rate?
A: It depends on the company's stage and funding. Generally, a lower burn rate relative to cash reserves is better for longer runway.

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

Q5: What expenses should be included in burn rate?
A: Include all operating expenses: salaries, rent, utilities, software subscriptions, marketing, professional services, and other recurring costs.