How Do You Calculate Cash Burn

Cash Burn Calculator

Calculation Results:

Monthly Gross Burn: $0.00

Monthly Net Burn: $0.00

Cash Runway: 0 months

function calculateCashBurn() { var monthlyOperatingExpenses = parseFloat(document.getElementById('monthlyOperatingExpenses').value); var monthlyRevenue = parseFloat(document.getElementById('monthlyRevenue').value); var monthlyCapitalExpenditures = parseFloat(document.getElementById('monthlyCapitalExpenditures').value); var monthlyDebtPrincipalRepayments = parseFloat(document.getElementById('monthlyDebtPrincipalRepayments').value); var currentCashBalance = parseFloat(document.getElementById('currentCashBalance').value); if (isNaN(monthlyOperatingExpenses) || isNaN(monthlyRevenue) || isNaN(monthlyCapitalExpenditures) || isNaN(monthlyDebtPrincipalRepayments) || isNaN(currentCashBalance)) { document.getElementById('grossBurnOutput').innerText = 'Invalid Input'; document.getElementById('netBurnOutput').innerText = 'Invalid Input'; document.getElementById('runwayOutput').innerText = 'Invalid Input'; return; } var grossBurn = monthlyOperatingExpenses + monthlyCapitalExpenditures + monthlyDebtPrincipalRepayments; var netBurn = grossBurn – monthlyRevenue; var runway = 0; if (netBurn > 0) { runway = currentCashBalance / netBurn; } else if (netBurn <= 0) { runway = Infinity; // Company is profitable or breaking even } document.getElementById('grossBurnOutput').innerText = '$' + grossBurn.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }); document.getElementById('netBurnOutput').innerText = '$' + netBurn.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }); if (runway === Infinity) { document.getElementById('runwayOutput').innerText = 'Infinite (Profitable/Breaking Even)'; } else { document.getElementById('runwayOutput').innerText = runway.toLocaleString('en-US', { minimumFractionDigits: 1, maximumFractionDigits: 1 }) + ' months'; } } // Calculate on page load with default values window.onload = calculateCashBurn;

Understanding Your Company's Cash Burn

Cash burn is a critical metric, especially for startups and growing businesses that are not yet profitable. It represents the rate at which a company is spending its cash reserves to fund its operations and growth before it generates positive cash flow. Understanding your cash burn helps you manage your finances, plan for future funding rounds, and ensure your business has enough runway to achieve its goals.

What is Gross Burn?

Gross burn is the total amount of cash a company spends over a specific period, typically a month. It includes all cash outflows, regardless of whether they are directly related to generating revenue. This encompasses operating expenses, capital expenditures, and debt principal repayments. It's a raw measure of how much cash is leaving the business.

Formula: Monthly Operating Expenses + Monthly Capital Expenditures + Monthly Debt Principal Repayments

What is Net Burn?

Net burn is often what people refer to when they talk about "cash burn." It's the difference between your gross burn and the cash you bring in from revenue. If your net burn is positive, it means you are spending more cash than you are generating, and your cash reserves are decreasing. If it's negative, you are cash-flow positive, and your cash reserves are growing.

Formula: Monthly Gross Burn – Monthly Revenue

What is Cash Runway?

Cash runway is the number of months a company can continue to operate before running out of cash, given its current cash balance and net burn rate. It's a crucial indicator of a company's financial health and sustainability. A longer runway provides more time to reach profitability, secure additional funding, or adjust business strategies.

Formula: Current Cash Balance / Monthly Net Burn

If your net burn is zero or negative (meaning you are profitable or breaking even), your runway is considered infinite, as you are not depleting your cash reserves.

Example Scenario:

Let's consider a tech startup with the following monthly figures:

• Monthly Operating Expenses: $50,000 (salaries, rent, software subscriptions)
• Monthly Revenue: $10,000 (from early customer subscriptions)
• Monthly Capital Expenditures: $5,000 (new server equipment)
• Monthly Debt Principal Repayments: $2,000 (loan principal)
• Current Cash Balance: $200,000

Using the calculator:

• Monthly Gross Burn: $50,000 + $5,000 + $2,000 = $57,000
• Monthly Net Burn: $57,000 – $10,000 = $47,000
• Cash Runway: $200,000 / $47,000 ≈ 4.3 months

This means the startup has approximately 4.3 months before it runs out of cash if its current spending and revenue patterns continue. This insight is crucial for making strategic decisions about fundraising, cost reduction, or revenue acceleration.