1. What is Burn Rate?

Burn rate is a measure of how quickly a company is spending its cash reserves, typically expressed as the amount of money spent per month. It's a key metric for startups and businesses to understand their financial runway.

2. How Does the Calculator Work?

The calculator uses the burn rate formula:

Where:

• \( \text{Cash Spent} \) — Total amount of money spent (in currency)
• \( \text{Period} \) — Time period over which the money was spent (in months)

Explanation: The formula divides the total cash spent by the time period to determine the monthly spending rate.

3. Importance of Burn Rate Calculation

Details: Calculating burn rate helps businesses understand how long they can operate before needing additional funding or becoming profitable. It's crucial for financial planning and investor communications.

4. Using the Calculator

Tips: Enter the total cash spent (in dollars or your local currency) and the period over which it was spent (in months). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross and net burn rate?
A: Gross burn rate is total cash spent per month, while net burn rate accounts for revenue (cash spent minus revenue).

Q2: What is a good burn rate?
A: This depends on your business stage and funding. Generally, lower is better, but you need to balance growth with sustainability.

Q3: How do I calculate runway from burn rate?
A: Runway = Current Cash Balance ÷ Monthly Burn Rate. This tells you how many months until you run out of money.

Q4: Should burn rate include all expenses?
A: Yes, it should include all cash outflows - salaries, rent, equipment, marketing, etc.

Q5: How often should burn rate be calculated?
A: Monthly calculation is typical, but startups might track it weekly during early stages or fundraising periods.