Runway is the only deadline a startup cannot negotiate with. It falls out of two numbers — how fast cash is going down, and how much cash is left — and both come from the burn rate. This burn rate calculator takes your monthly expenses, monthly revenue, and cash on hand, and returns gross burn, net burn, and the runway in months, so the deadline is a date you can plan against instead of a surprise.
Gross Burn, Net Burn, Runway
Three definitions, kept straight. Gross burn is total monthly cash out — salaries, rent, servers, everything. Net burn is gross burn minus monthly revenue: the rate at which the bank balance actually falls. Runway = cash on hand ÷ net burn, in months. Investors quote net burn; operators watch gross burn because it is the number their decisions directly move. A company spending 80,000 with 30,000 coming in has a gross burn of 80,000, a net burn of 50,000, and — with 500,000 in the bank — a 10-month runway.
Worked Example: Reading the Deadline
Expenses 80,000 a month, revenue 30,000, cash 500,000. Net burn = 80,000 − 30,000 = 50,000 per month. Runway = 500,000 ÷ 50,000 = 10 months. Now the planning starts: a fundraise takes three to six months from pitch to wire, so the raise must effectively begin by month four to six — not month nine. Cut net burn to 40,000 (trim 10,000 of spend, or add it in revenue) and runway stretches to 12.5 months: two and a half months bought for a 20 percent burn reduction. That exchange rate is why runway arithmetic rules startup calendars.
Burn Is a Cash Concept, Not an Accounting One
Burn rate counts cash movement, which is not the income statement. Depreciation is an expense that burns nothing; a prepaid annual contract burns twelve months of cash in one. Salaries hit when paid, revenue counts when collected — a company can be "profitable" on paper while its runway collapses under slow-paying customers. Build the expense input from the bank statement's actual outflows over a recent month rather than from the budget, and treat one-off spikes (annual insurance, tax payments) by averaging a quarter.
The Burn Multiple and Other Refinements
As companies mature, raw burn gets company: the burn multiple (net burn ÷ net new annual recurring revenue) judges how efficiently burn converts into growth — under 1 is excellent, over 2 draws questions. Scenario discipline matters too: runway at today's burn is the optimistic bound, because it assumes no planned hiring happens. Founders routinely model three runways (current, planned-hiring, austerity) because the single number hides the choices. This calculator's inputs are the current case; rerun it with planned expenses to see the honest second case.
Extending Runway: The Two Levers
Every runway extension is arithmetic: shrink net burn or grow the cash pile. On the burn side, the big lines are people, so the levers are hiring pace, contractor spend, and infrastructure — small lines rarely sum to a month of runway. On the revenue side, collections discipline (invoicing promptly, chasing receivables) moves cash without selling anything new. The trap to avoid is cutting the spend that produces revenue: net burn falls this month and revenue falls next quarter, and the multiple quietly worsens.
Common Mistakes
Computing burn from the P and L instead of the bank balance is the founding error. Using a single flattering month (revenue is lumpy; average a quarter) flatters the runway. Forgetting that burn usually grows — salaries annualize, headcount creeps — makes today's runway an overestimate; haircut it. And treating runway as time until zero rather than time until you must have closed money: the last three months of cash are not spendable runway, they are the fundraise's closing window.
Reading Burn Like an Investor
When a founder reports burn, a practiced listener hears three questions behind it. Is the burn buying growth or maintaining existence — what did revenue do over the same months? Is the burn planned or discovered — does this month match the model's month? And what does the burn become at the next milestone — does it step up with the hiring plan or flatten at profitability? The calculator gives the level; those questions give the trajectory, and trajectory is what gets funded.
Related Tools
Startup finance continues in the Finance Calculators hub — the Churn Rate Calculator watches the revenue side leak, and the Contribution Margin Calculator prices the product itself.
Frequently Asked Questions
How do you calculate burn rate?
Net burn = monthly expenses minus monthly revenue. Gross burn is expenses alone. With 80,000 of spend and 30,000 of revenue, net burn is 50,000 per month.
How is runway calculated?
Runway = cash on hand divided by net burn. 500,000 of cash at a 50,000 monthly net burn gives 10 months of runway.
What is a good runway?
Post-raise, 12 to 18 months is the conventional target — long enough to hit milestones and raise again from strength. Under 6 months is emergency territory because fundraising itself consumes a quarter or more.
What is the difference between gross and net burn?
Gross burn is everything going out each month. Net burn subtracts revenue coming in — it is the rate the bank balance falls, and the one runway is computed from.
Is burn rate the same as monthly losses?
Close in spirit, different in bookkeeping. Losses are accounting figures (including non-cash items like depreciation); burn is pure cash. For runway decisions, cash burn is the number that empties the account.
How can a startup reduce its burn rate?
Slow hiring, renegotiate or cut contractor and infrastructure spend, tighten collections so booked revenue becomes cash sooner, and grow revenue. Because salaries dominate most burns, headcount pace is usually the largest single lever.
What is the burn multiple?
Net burn divided by net new recurring revenue over the same period. It prices growth: burning 100,000 to add 100,000 of annual recurring revenue is a multiple of 1 — efficient. Above 2, each growth dollar is costing more than two burn dollars.