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Startup Burn Rate Calculator

How much runway do you have? That depends on how soon you expect to secure more funding or generate enough revenue to cover your expenses

By:

We Are Founders Staff

Understanding your burn rate and runway is essential, whether you’re handling it yourself or have a CFO or accountant on board. It's not a one-time task, but an ongoing process as your business grows and evolves.

The big question: how much runway do you actually have?

Burn Rate = Cash Outflow - Cash Inflow

If your company is spending £10,000 a month and making £2,000 in revenue, your burn rate would be: Burn Rate = £10,000 - £2,000 = -£8,000 per month

This means you're losing £8,000 each month, so you'd need to manage that spending or find more revenue to stay afloat.

That hinges on how long it’ll take to secure more funding or generate enough revenue to cover your expenses.

If your cash reserves won’t last until your next funding round or product launch, you’re in a tight spot. But if your revenue is climbing and funding is on the horizon, things might not be as bleak.

Ultimately, interpreting burn rate and runway depends on the specifics of your business. Still, it’s useful to compare where you stand with typical startup figures to help plan your spending and financing needs.

That's why we built this handy burn rate calculator, so you can get quick insights into your burn rate and make informed decisions.

Burn rate Q and A

What is burn rate, and why is it important for startups?

Burn rate is the speed at which a startup spends its cash. It’s a critical metric because it shows how long your business can survive before running out of money. Knowing your burn rate helps you manage expenses and plan for funding rounds to keep the business running.

What’s the difference between gross burn rate and net burn rate?

Gross Burn Rate is the total amount of money your startup spends each month, without considering revenue. Net Burn Rate takes your revenue into account, showing the net amount of cash you’re losing each month. For example, if you spend £10,000 but make £2,000 in revenue, your gross burn rate is £10,000, while your net burn rate is £8,000.

How does burn rate affect my startup’s runway?

Runway is the amount of time your startup can survive before running out of cash, based on your current burn rate. The formula is: Runway = Cash in Bank ÷ Burn Rate. For example, if you have £100,000 in the bank and your burn rate is £8,000 per month, your runway is: Runway = £100,000 ÷ £8,000 = 12.5 months. This means you have 12.5 months before you run out of money if your expenses and income stay the same.

What are some common ways to reduce my burn rate without hurting growth?

You can reduce your burn rate by cutting non-essential expenses, negotiating better deals with suppliers, automating processes, or finding more cost-effective marketing strategies. However, you should avoid cutting areas that drive growth, like product development or customer acquisition, as this could slow down your business in the long run.

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