Burn Rate & Runway Calculator

How the burn rate and runway calculator works

Burn rate measures how fast a business consumes cash. Runway converts that speed into time: how many months the current balance lasts before it reaches zero. Both come from three inputs — cash on hand, monthly revenue, and monthly operating expenses — and the arithmetic is deliberately simple:

Gross burn versus net burn

Gross burn is everything that goes out the door in a month: payroll, rent, software, contractors, marketing, interest. It says nothing about what comes in. Net burn nets revenue against that spend, so it is the figure that actually moves the bank balance. A business spending $65,000 and collecting $40,000 has a gross burn of $65,000 but a net burn of $25,000.

The distinction matters because the two numbers answer different questions. Gross burn tells you the size of your cost base, which is what you would have to dismantle if revenue disappeared entirely. Net burn tells you the size of the hole you are currently filling from savings. Runway is always calculated from net burn, because that is what depletes cash. Reporting runway off gross burn understates it, sometimes badly.

Why growth changes the runway number

The flat runway formula freezes revenue and expenses at today's values for the entire projection. That is a useful sanity check and it is how most people quote runway, but it is rarely what happens. Revenue moves. Costs move. Compounding does the rest.

If revenue compounds faster than expenses, net burn narrows every month, each month costs less than the one before it, and the real runway stretches past the flat estimate. Push the growth far enough and the two lines cross before the cash runs out, at which point the balance stops falling altogether. If expenses compound faster than revenue, the reverse happens: net burn widens and the runway is shorter than the flat number implies.

There is a subtlety worth noticing. Percentage growth applies to different base numbers. When expenses are much larger than revenue, a small expense growth rate can add more dollars per month than a much larger revenue growth rate. At $65,000 of expenses and $40,000 of revenue, 2% expense growth adds $1,300 a month while 3% revenue growth adds only $1,200 — so net burn widens even though revenue is growing faster in percentage terms. The percentages alone do not tell you which way the runway moves; the dollars do.

Break-even and the cash you have left when you get there

Break-even here is the first month in which revenue is greater than or equal to expenses. It is a cash-flow crossover, not an accounting profit calculation, and it is the point where the burn stops. Two figures describe it: which month it lands in, and what the cash balance reads on that date.

The second figure is the one that gets skipped. A crossover in month 30 is a different proposition depending on whether the balance is $200,000 or negative. When the calculator reports a negative cash balance at break-even, it means the projection ran out of money before the lines crossed — the plan requires financing, more time, or different numbers to reach the crossover it describes. When revenue never catches expenses inside 240 months, the calculator says so rather than printing a number that does not exist.

What the model does not capture

Smooth compounding is an abstraction. Real revenue is seasonal and lumpy; real expenses arrive in steps when you sign a lease or hire a team, not as a steady percentage. Cash timing is its own problem: revenue recognized in a month may be collected 45 days later, and payroll does not wait. This model also uses cash spend, so it excludes non-cash charges like depreciation and it ignores one-time inflows such as a financing round or a tax refund unless you fold them into the cash-on-hand figure yourself.

Growth rates held constant for 240 months are also an assumption, and an aggressive one. High early growth rates rarely persist, and a model that compounds them indefinitely will show a business that never runs out of money. This makes the growth-adjusted runway a sensitivity test rather than a forecast: running several rate combinations shows how far the answer moves when the inputs move, producing a range rather than a single figure.