Burn Rate Formula: Gross vs Net Burn Explained With Examples

The burn rate formula is the easiest math you will do all week. The hard part is making sure the numbers you plug in are accurate. Here is the formula, three worked examples, and a calculator that handles it for you.

The formula

There are two formulas — one for gross burn and one for net burn:

Metric	Formula
Gross burn rate	Total monthly expenses
Net burn rate	Monthly expenses − Monthly revenue
Runway (months)	Bank balance ÷ Net burn
Zero date	Today + (Runway × 30 days)

That is it. Four formulas that tell you everything you need to know about your cash position.

Example 1 — Pre-revenue startup

A two-person startup just raised $200,000. They have no revenue yet.

• Bank balance: $200,000
• Monthly expenses: $18,000 (founder salaries, software, contractor, rent)
• Monthly revenue: $0
• Gross burn: $18,000/month
• Net burn: $18,000 − $0 = $18,000/month
• Runway: $200,000 ÷ $18,000 = 11.1 months

This team has roughly 11 months to find product-market fit. If they cut expenses to $12,000 by removing one contractor, runway jumps to 16.6 months.

Example 2 — Startup with some revenue

A SaaS company has been live for 8 months and has paying customers.

• Bank balance: $480,000
• Monthly expenses: $52,000
• Monthly recurring revenue: $14,000
• Gross burn: $52,000
• Net burn: $52,000 − $14,000 = $38,000
• Runway: $480,000 ÷ $38,000 = 12.6 months

Even though gross expenses are high, the $14K in MRR shaves $14K off the burn each month. That is the magic of recurring revenue — every new customer extends runway permanently.

Example 3 — Profitable company

An established business has expenses below revenue.

• Bank balance: $1,200,000
• Monthly expenses: $75,000
• Monthly revenue: $95,000
• Gross burn: $75,000
• Net burn: $75,000 − $95,000 = −$20,000 (negative)
• Runway: Infinite (profitable)

Negative net burn means the company is generating cash, not consuming it. Runway is technically infinite. The team can still track gross burn for cost discipline, but they no longer have a death clock.

How to gather the numbers

The formula is trivial. Getting accurate inputs is where founders trip up.

Monthly expenses checklist

• Payroll (salaries + benefits + payroll taxes)
• Contractors and freelancers
• Rent and utilities
• Software subscriptions (sum every recurring SaaS line)
• Marketing spend (ads, content, tools)
• Legal, accounting, professional services
• Insurance
• Travel and meals
• Equipment depreciation or leases
• Banking and payment processing fees

Monthly revenue checklist

• Subscription revenue actually collected (not invoiced)
• One-time sales
• Service or consulting revenue
• Affiliate or partnership income

Common mistakes when calculating burn

1. Counting deferred revenue as cash. If a customer pays you $12,000 upfront for an annual subscription, recognize it in cash (it is in your bank) — but do not double-count it as $1,000/month MRR plus $12,000 cash.
2. Forgetting annual renewals. Your $5,000 yearly insurance bill should hit your monthly burn as $417/month even though you only pay it once.
3. Ignoring credit card timing. Charges on a card show up in your bank a month after they happen.
4. Using gross burn as net burn. If you have any revenue, net burn is the relevant number for runway calculations.

Beyond the formula — modeling scenarios

The formula gives you one snapshot. The real value is asking "what if?" What if you cut marketing 30%? What if you hire one more engineer? What if MRR grows 15% per month?

The calculator includes a scenario slider so you can test ±30% expense changes instantly. Use it before any big spend decision.