Glossary

What is burn rate?

Burn rate is how much cash a business uses each month. Gross burn is total cash out; net burn is cash out minus cash in. Net burn is the figure that goes into cash runway, while gross burn shows the size of the cost base and is used for stress tests.

Also called: Net burn, Gross burn

A single month is a poor base because it may contain one-offs such as an annual insurance premium or a quarterly tax payment, so burn is usually averaged over the last three to six months. A business whose cash in exceeds cash out has a negative net burn and is described as cash-positive at the current rate.

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FAQ

Questions people ask

Which burn figure matters more?
Net burn describes the business as it trades and sets runway. Gross burn shows what would have to be paid if revenue stopped, which is why lenders and investors often look at both.

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