burn rate
Burn rate tracks how fast a company spends cash—helping teams measure how long their capital will last at current operating levels.
Burn rate tells you how quickly your company is spending cash. It’s the monthly amount going out—regardless of how much comes in. For early-stage startups, it’s a survival metric. For later-stage companies, it’s a signal of control, efficiency, and discipline.
This figure helps you calculate your runway: how many months of cash remain before funding runs out. A high burn isn’t always bad—but it must be intentional. When growth justifies spend, the burn reflects investment. When it doesn’t, it signals risk.
How burn rate drives decisions
A seed-stage startup spends $200K per month with $1.2M in the bank. That gives them six months of runway. They adjust hiring, delay ad spend, and extend that to nine months—just enough to reach key milestones before raising again.
In another case, a Series B company burns $800K monthly but closes deals worth $1M in new ARR each quarter. The team models burn against sales efficiency and decides to keep investing aggressively. Burn alone doesn’t guide them—context does.
What people get wrong about burn rate
Some treat it as a number to minimize at all costs. But zero burn often means zero progress. Others calculate it without including all costs—like deferred payments or one-time spikes. That creates false confidence.
Another mistake: ignoring how burn interacts with growth. If burn increases but CAC, retention, or margins improve alongside it, that might be the right trade. But if burn rises and efficiency drops, the model breaks.
You can’t manage what you don’t measure
Burn rate isn’t about fear—it’s about foresight. It keeps strategy grounded in reality. It forces teams to weigh speed against control. And when tracked with discipline, it becomes a tool—not a threat. Because managing growth isn’t just about raising money. It’s about making it last long enough to matter.
« Back to Glossary Index