Calculating Your Company's Burn Rate

Calculating Your Company's Burn Rate

Calculating your company's start-up burn rate is fairly straightforward. Your burn rate tells you the amount of cash that you have used up in one month. This is known as negative cash flow. Your burn rate does not include money that you are going to receive, money that has been put into another account, or any outstanding bills. Is some folks like to separate their net burn rate from their gross burn rate. This separation is unnecessary. It only complicates matters. The reason why it complicates things is that the gross burn rate is the amount of money that you have spent in a month. It does not include any incoming cash. The net burn rate takes into account any incoming cash. You subtract the incoming cash from spending. This amount is used to determine your net burn rate. It helps you realize how much cash you need to break even. This way, you won't run out of cash. To keep things simple, it's best to refer to your net burn rate as just your burn rate. You can calculate your burn rate either with investor money or without any venture capital.



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