Burn Rate is the rate at which a company spends (or "burns") its cash pool in a loss-generating scenario. For pre-revenue startups, burn rate is synonymous with total monthly operating expenses. It is the most vital metric for early-stage companies because it dictates your company's lifespan.
"Cash is oxygen. Burn rate measures how fast you are consuming that oxygen."
Without revenue, your cash balance is a melting ice cube. Every dollar spent on rent, salaries, server costs, and marketing reduces the time you have to find Product-Market Fit (PMF) or secure the next round of Venture Capital (VC) funding.
Gross Burn vs. Net Burn: The Difference
It is crucial to distinguish between the two types of burn, although for pre-revenue companies they are often the same.
Gross Burn
Gross Burn is the total amount of money leaving your bank account each month. It includes all expenses: salaries, rent, subscriptions, marketing, etc.
Gross Burn = Total Monthly Expenses
Net Burn
Net Burn is the total cash loss per month. It accounts for any incoming revenue.
Net Burn = Gross Burn - Monthly Revenue
For Pre-Revenue Startups: Since Revenue is $0, Net Burn = Gross Burn. This calculator focuses on this scenario, giving you a clear picture of your total monthly outflow.
How to Calculate Runway
Your **Runway** is the amount of time (usually in months) you have before you run out of cash completely (zero cash date). It is the most important deadline for any founder.
Runway (Months) = Current Cash Balance / Net Monthly Burn
For example, if you have $500,000 in the bank and your monthly burn is $50,000:
$500,000 / $50,000 = 10 Months of Runway.
This means you have exactly 10 months to either:
Generate enough revenue to cover costs (become cash flow positive).
Raise more capital (which usually takes 3-6 months).
Drastically cut costs to extend the valid timeline.
Strategies to Extend Your Runway
If your runway is less than 12 months and you don't have a clear path to funding, you need to reduce burn. Here are actionable strategies:
1. Rationalize Headcount
Salaries often make up 70% of a startup's burn. Delay hires, use contractors for non-core roles, or offer higher equity in exchange for lower salary.
2. Cut Software Bloat
Audit your SaaS subscriptions. Cancel unused tools. Apply for startup credits (AWS, Google Cloud, Stripe) which can save thousands.
3. Zero-Budget Marketing
Stop paid ads if you don't have clear positive unit economics. Focus on content marketing, cold outreach, and viral loops.
4. Remote First
Do you really need an office? Remote teams save significantly on rent, utilities, and perks.
Burn Rate Benchmarks
While every company is different, VC investors often look for specific burn patterns based on stage:
Pre-Seed: $10k - $30k / month. Founders typically take minimal salary. Focus is on MVP.
Seed Stage: $30k - $80k / month. Small team (3-8 people). Focus is on Product-Market Fit.
Series A: $100k - $300k+ / month. Scaling sales and engineering. Revenue should be growing fast to justify this burn.
The Golden Rule: Never let your runway drop below 6 months. If you do, you lose all leverage in negotiations with investors.
Frequently Asked Questions
What is a good burn rate?
There is no single number, but a "good" burn rate is one that gives you 18-24 months of runway after a funding round. If you are burning $50k/mo, you should ideally have raised ~$1M.
Should I include one-time expenses?
Ideally, no. Burn rate is meant to track recurring monthly operational costs. If you buy a $2,000 laptop once, it shouldn't permanently inflate your monthly burn calculation. Use a "Misc" buffer for small irregularities.
How can I reduce my burn rate?
The biggest lever is usually headcount (salaries). Other ways include switching to annual SaaS plans (if cash allows), negotiating rent, or cutting non-essential marketing spend.
Does burn rate include taxes?
Yes. Payroll taxes, anticipated corporate taxes, and any licenses should be included. These are cash outflows.
Summary
This calculator helps pre-revenue startups estimate their monthly burn rate and runway.
It breaks down expenses by category (Salaries, Rent, Marketing, etc.) and visualizes the data.
Monitoring these metrics is essential for financial survival and successful fundraising planning.
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Estimate your monthly burn rate and runway based on detailed expenses for early-stage startups.
How to use Burn Rate Calculator for Pre-Revenue Startups
Step-by-step guide to using the Burn Rate Calculator for Pre-Revenue Startups:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Burn Rate Calculator for Pre-Revenue Startups?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Burn Rate Calculator for Pre-Revenue Startups is designed to be user-friendly and provide instant calculations.
Is the Burn Rate Calculator for Pre-Revenue Startups free to use?
Yes, the Burn Rate Calculator for Pre-Revenue Startups is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Burn Rate Calculator for Pre-Revenue Startups is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Burn Rate Calculator for Pre-Revenue Startups accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.