Quick Action Guide 2 min read

How to Calculate Your Monthly Burn Rate

A 2-minute guide on calculating the money your business spends before reaching profitability.

Play Strategy Walkthrough

What is Burn Rate?

Burn Rate is the rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations. It is a measure of negative cash flow.

The Simple Formula

To calculate your gross burn rate:

$$Gross Burn = Total Operating Expenses$$

To calculate your net burn rate:

$$Net Burn = (Total Revenue) - (Total Operating Expenses)$$

Example

If your startup spends R50,000 per month on rent, salaries, and servers, and earns R10,000 per month:

  • Gross Burn: R50,000
  • Net Burn: -R40,000

Funders look for a net burn rate that is sustainable given your total capital. If you have R400,000 in the bank and a net burn of R40,000, you have exactly 10 months of runway. **

Steps to Implement in the Builder

  1. Go to the Costs & Forecasting section.
  2. List all your fixed costs (Rent, Salaries).
  3. List your variable costs (COGS).
  4. The builder will automatically calculate your burn rate and runway.

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