Burn Rate Calculator

Burn rate formulas, with Excel and Google Sheets versions

Each output above is one of these. The examples use the calculator's default numbers, which are illustrative. The cell formulas work the same in Excel and Google Sheets.

B2 is cash on hand, C2 monthly cash out, D2 monthly cash collected, E2 net new ARR for the last three months and F2 the monthly growth rate of collections (4% is 0.04). G2 and H2 are the starting and ending balances, I2 the months between them and J2 any money raised or borrowed in that time.

The last row is the one most calculators skip. At 4% monthly growth, collections catch up with $400,000 of spending in about 25 months, but at that pace the cash runs out in month 16. A company in that spot is what Paul Graham calls default dead: on its current spending and growth, it runs out of money before it turns profitable.

How to calculate burn rate, step by step

1. Pick a period. Use the last three months, or six if you pay large annual bills. One month can mislead: a prepaid annual contract or a yearly insurance bill swings it.
2. Add up cash out. Every dollar that left the bank: payroll and benefits, rent, software, contractors, marketing, taxes, loan repayments and equipment.
3. Add up cash collected from customers. Money received, not money invoiced. Leave out funding rounds, new loans and interest on deposits.
4. Divide each by the months. Average cash out per month is your gross burn.
5. Subtract. Average cash out minus average cash collected is your net burn.
6. Divide today's cash by net burn. That is your cash runway in months, if nothing changes.

Check the result against your bank balances. Starting cash minus ending cash, plus anything raised in between, should equal net burn times the months. If it does not, a payment is missing from one side. The second tab of the calculator runs this check for you.

Gross burn vs net burn: which one matters?

Net burn sets your runway, because it is the amount the bank balance actually falls each month. Gross burn shows how exposed you are if revenue stalls. Report both, and label them, because "burn" on its own is ambiguous.

The gap between the two is the revenue cushioning your spend. In the example it is $150,000, or 37.5% of spending. The smaller that cushion, the faster runway falls if customers pay late or leave. For more on the terms, see ORM's definition of burn rate.

What counts as cash out, and what does not

The rule is simple: burn measures operating cash. Financing goes in a separate line. Counting a raise as cash collected makes burn look tiny for one month and runway look endless. Invoices are the other trap. A customer billed in March who pays in May helps your runway in May. ORM's guide to billings vs cash collections covers why the two diverge.

Worked example: the calculator's defaults

The numbers are illustrative. A SaaS company has $3,000,000 in the bank. Over the last three months it paid out an average of $400,000 a month and collected $150,000. It added $450,000 of net new ARR in the quarter. Collections have grown about 4% a month.

• Gross burn is $400,000. Net burn is $400,000 - $150,000 = $250,000.
• Flat runway is $3,000,000 / $250,000 = 12.0 months.
• Burn multiple is (3 x $250,000) / $450,000 = 1.67x, in the band Craft Ventures calls good.
• With collections growing 4% a month, net burn shrinks each month and runway stretches to 15.0 months. Collections would not catch up with spending until about month 25, so the company is still default dead.
• Cut spending 10%, to $360,000, and keep the same growth. Collections now cover spending in month 24, with about $213,000 still in the bank. The same company is default alive.

A 10% cut is $40,000 a month. It moves the company from running out of cash in about 15 months to reaching breakeven before it runs out. That is why runway should be run with growth and spending changes, not only as one division.

How much runway is enough?

Enough runway outlasts the time it takes to reach your next milestone, plus the time to raise or cut if you miss it. There is no universal number, so anchor it to how long a round takes and to whether you are default alive.

• Time between rounds is long. The median gap between a seed round and a Series A reached 616 days in Q2 2025, a little more than 20 months, according to Carta. If your runway is shorter than the gap you are planning for, the next round has to come faster than the median.
• Default alive changes the question. A company that reaches breakeven on its current cash does not need a round to survive. One that does not has a deadline. Paul Graham's default alive or default dead test (October 2015) assumes expenses stay constant and revenue keeps growing at its recent pace, which is what the "Your plan" row in the scenarios shows when spending growth is 0.
• Hiring moves the date. A new hire adds to gross burn on day one. Pete Furseth, ORM's COO, sees B2B SaaS sellers take 15 to 18 months to become fully productive, so a sales hire made today burns cash for more than a year before it pays for itself.

If runway is short and you are default dead, act while you still have time to act: cut, raise, or change the plan. In Pete's words on missing a target, "Bad news doesn't get better with time."

Burn multiple: is your burn buying growth?

The burn multiple is net burn divided by net new ARR for the same period. It tells you how many dollars of cash you burn to add one dollar of recurring revenue. David Sacks of Craft Ventures popularized it in 2020 with these rules of thumb for venture-stage startups:

Source: Craft Ventures, The Burn Multiple (April 2020). Two rules keep it honest. Use net new ARR, after churn and contraction, never gross new ARR. And measure net burn and net new ARR over the same quarter. Pre-revenue companies have no net new ARR, so the ratio does not compute, and the calculator says so. Where the bands sit for your stage is covered in what is a good burn multiple.

Run a range, not one number

A single runway number hides the risk around it. The calculator's scenario table runs four cases from your inputs:

• Flat: nothing changes. This is the cash / net burn number most calculators show.
• Your plan: collections and spending change at the monthly rates you entered.
• Low case: collections 20% lower than today and not growing. Spending changes as planned.
• Cut spending 10%: your plan, with cash out 10% lower from month 1.

This follows how Pete builds a forecast a board trusts: show a low case, an on-target case and an upper bound, so the board sees the expected outcome and the risk around it. Keep the same numbers from slide to slide, and explain any change.

Common burn rate mistakes

• Using the P&L instead of the bank. Accrued expenses, depreciation and stock compensation are not cash. Burn is what left the account.
• Counting a raise as revenue. Money raised or borrowed is financing. Leave it out of cash collected, or burn looks smaller than it is.
• Reading one month. An annual prepayment or a quarter-end rush skews a single month. Pete sees bookings peak in the third month of a quarter and dip in the first, so one month of collections can mislead. Average three months.
• Using bookings, not collections. A signed deal does not extend runway until the customer pays.
• Assuming growth with no limit. Collections that grow 4% a month keep compounding in a spreadsheet. Check that your pipeline can supply that growth.
• Using gross new ARR in the burn multiple. It flatters the ratio by the size of your churn.

What Pete Furseth watches when burn and runway are tight

Pete Furseth, ORM's COO, has a short list of operator checks that change how a runway number should be read.

• Pulled-forward deals cost you later. Pulling a deal into this quarter usually means a discount, so the deal is worth less. It also shrinks next quarter's starting pipeline, which is often built 6 to 12 months ahead. A strong collections month from pull-ins can be followed by a weak one.
• Longer sales cycles push cash out. In 2026, ORM has seen cycle length move first when a quarter slips, as buyers delay decisions. If deals close later, cash arrives later, and the low case is the one to plan around.
• Plan hiring two years out. Capacity has to exist before the revenue needs it. In the models ORM builds, moving from a one-year to a two-year capacity plan reduces cost by about 5%, and optimized capacity planning yields 10% to 15% more productive capacity for the same spend. Both lower the burn needed for the same growth.
• Assumptions go stale. The most common reason a forecast misses is that the market changed and the model did not. Re-run runway at every monthly close with fresh inputs, not last quarter's growth rate.

To size the hiring plan behind your spending line, use the sales capacity planner.

ORM's take: runway is only as good as the revenue forecast in it

This calculator gives you a clean burn rate and runway from today's numbers and the growth you assume. The weakest input is the growth rate. It is a guess about how much pipeline will close, when, and at what price.

That is what ORM forecasts. We build bookings and ARR forecasts from your own CRM data, with a range around them, and tie them to the hiring plan that drives your spending. ORM targets 95% accuracy on the forecasts it builds. Put a forecast you trust into the growth box and the runway number means something. For the cash side, see cash flow forecasting, and for growth and burn together, the Rule of 40.

Common questions

What is the formula for cash burn?

Net cash burn is cash out minus cash collected for one month. Gross burn is the cash out on its own. From bank statements, net burn is starting cash plus any money raised, minus ending cash, divided by the months in the period. A company that pays out $400,000 and collects $150,000 has a gross burn of $400,000 and a net burn of $250,000.

What is considered a good burn rate?

A burn rate is not good or bad on its own. A burn rate works when the runway behind it outlasts the time to your next milestone or raise, and when the burn is buying growth. Check two numbers: months of runway, and the burn multiple, which is net burn divided by net new ARR. Craft Ventures calls a burn multiple under 1x amazing and over 3x bad.

What is the burn rate of a company?

Burn rate is how fast a company spends its cash, usually stated per month. Gross burn rate is total cash spent. Net burn rate subtracts the cash customers paid, so it equals the real drop in the bank balance. Boards and investors usually mean net burn, because it sets how many months of runway the company has left.

How do you calculate cash runway?

Divide cash on hand by monthly net burn. $3,000,000 in the bank at a $250,000 net burn is 12 months. That math assumes spending and collections stay flat. If collections grow each month, runway stretches, and if hiring pushes spending up, it shrinks. The calculator above runs the month-by-month version so you can see both.

What is a good burn multiple?

Craft Ventures, which popularized the metric, gives these rules of thumb for venture-stage startups: under 1x is amazing, 1 to 1.5x great, 1.5 to 2x good, 2 to 3x suspect and over 3x bad. Measure it over a quarter, and use net new ARR rather than gross new ARR so that churn counts against you.

How is monthly cash flow different from burn rate?

Monthly net cash flow is all cash in minus all cash out, including funding rounds and new loans. Burn rate covers the cash the business spends and the cash customers pay. A month with a $2,000,000 raise shows strongly positive cash flow, yet the burn rate has not changed. Keep money raised or borrowed out of burn, or runway will look longer than it is.

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