Burn rate and runway calculator

How burn rate and runway are calculated

Net burn is what actually leaves the business each month: total expenses minus the revenue coming in. A company spending $42,000 and collecting $18,000 has a net burn of $24,000, not $42,000. That distinction is the whole point, because gross burn describes your cost base while net burn describes how fast the bank account empties, and only one of them sets your deadline.

Runway is cash divided by net burn. $250,000 against a $24,000 net burn is about ten months. The calculator holds burn flat rather than projecting growth into it, which is deliberate: a runway number that assumes the revenue curve keeps bending is the most comfortable lie in startup finance, and the flat version is the one you can actually plan a fundraise around.

The month your cash reaches zero matters more than the count of months, because that is the date every other decision hangs off. Fundraising takes three to six months from first meeting to money in the bank, so a ten-month runway means you are starting conversations in month four, not month nine.

• Net burn = monthly expenses − monthly revenue
• Runway (months) = cash ÷ net burn
• Gross burn is expenses alone, ignoring revenue
• Revenue above expenses means no runway to count: you are default alive

Default alive, and the growth that gets you there

Paul Graham's framing is the most useful question a founder can ask: on your current trajectory, do you reach profitability before the money runs out? If yes, you are default alive, and every other decision, including whether to raise at all, becomes yours to make rather than the market's. If no, you are default dead, and the clock is running whether or not anyone says it out loud.

The answer is not just a matter of spending less. Growth compounds against a mostly flat cost base, so a modest monthly growth rate applied for long enough can cross expenses before the cash does. This calculator solves for that rate: the smallest monthly revenue growth that reaches breakeven while there is still cash left. When it says no rate works, the honest reading is that cost is the lever, not sales.

Two things make that answer optimistic in real life, and both are worth adjusting for. Expenses rarely stay flat while revenue grows, since serving more customers costs more. And gross revenue is not the money that reaches your runway: subtract payment processing, hosting and support before you call it contribution.

What quietly ruins a runway number

The most common error is using bookings or MRR where cash belongs. An annual contract signed today can be $12,000 of bookings, $1,000 of MRR and $12,000 of cash all at once, and only the cash figure extends your runway. If your customers pay annually up front, your cash position leads your MRR; if they pay monthly, the two move together. Neither is better, but confusing them makes runway either flattering or terrifying for no real reason.

The second is forgetting the lumps. Annual insurance, tax bills, a conference, an audit, a compliance review: quarterly and yearly costs make an average month a poor guide to a specific month. Spreading known lumps across the year before computing burn keeps a single expensive month from arriving as a surprise.

The third is treating churn as a separate problem. Revenue that leaves shortens the runway exactly as fast as an expense that arrives, and it does so quietly, without anyone approving a purchase order. A book losing 5% of its revenue a month is applying a real, compounding cost to your runway that no expense line reflects.

• Runway is measured in cash, never in MRR or bookings
• Spread annual and quarterly costs across the months before averaging
• Churn shortens runway as effectively as new spending does
• Subtract processing, hosting and support from revenue before counting it