Formula
How to Calculate Net Burn
The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
Net Burn Rate (monthly)
Net Burn = Total Expenses - Total Revenue
Where
- Total Expenses
- = All monthly operating expenses
- Total Revenue
- = All monthly revenue
What Is Net Burn?
Net burn (also called net cash burn) is the actual monthly cash outflow after revenue is credited: Net Burn = Gross Burn − Revenue. It represents the true rate at which a startup is consuming its cash reserves and is the correct figure to use when calculating runway. A company with $500K gross burn and $200K in monthly revenue has $300K net burn — it's depleting its cash at $300K/month. At that rate, $3M in the bank provides 10 months of runway. Net burn can turn negative (become net cash positive) when revenue exceeds all operating expenses — at which point the company has reached cash flow breakeven. This is a major milestone for venture-backed companies because it eliminates existential fundraising risk.
Worked Example
Company has $600K gross burn and $400K monthly revenue. Net burn = $200K/month. With $2.4M in the bank, it has 12 months of runway. If revenue grows to $600K/month with costs flat, net burn hits zero — the company is cash flow neutral and no longer dependent on raising to survive.
Why Net Burn Matters
Net burn is the most important day-to-day financial metric for a startup because it determines how long the company can survive without raising more capital. Investors scrutinize net burn trajectory — declining net burn (as revenue grows) signals improving unit economics and reduces fundraising pressure.
Related Terms
Frequently Asked Questions
How do you calculate Net Burn?
Net Burn is calculated using the formula: Net Burn = Total Expenses - Total Revenue. The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
What is a good Net Burn?
What constitutes a "good" Net Burn depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.