What is Burn rate?
How much cash the company consumes per month — net of what's coming back in.
Burn rate is the rate at which a company spends its cash reserves, quoted per month. It's the number behind "how long can we keep operating like this" — and the number lenders, boards, and investors ask for first when the balance is falling.
Use net burn: cash out minus cash in. Gross burn (total cash out) ignores the revenue coming back in and overstates the problem for any company with sales; net burn is what actually predicts the zero-cash date. A profitable month has negative net burn — the balance grew.
Quote burn as a trailing average (commonly 3 months), not a single month: payroll cycles, tax dates, and annual prepayments make single months lurch. The trailing average is also what you divide the cash balance by to get runway.
Formula
Net burn = cash out − cash in (per month)
Gross burn is cash out only. The quotable figure is usually the trailing 3-month average of net burn, which is what the runway formula consumes.
The Sumwise question
Calculate monthly net burn: cash in and cash out by month, net burn, the trailing 3-month average burn, latest month first — from the cash activity export.
Runs on cash_activity.csv. The same sample the burn-rate & runway live demo runs on — nine months of cash activity with the closing balance per month.
Worked example — cash_activity.csv
| September: cash out / cash in | $809,000 / $452,000 |
| September net burn | $357,000 |
| August net burn | $352,000 |
| July net burn | $345,000 |
| Trailing 3-month average net burn | $351,333 |
| September gross burn (cash out only) | $809,000 |
Net burn is steady at a $351,333 trailing average — about $351k of cash consumed per month, against $809k of gross outflows mostly covered by collections.
cash_activity.csv — drop it into the demo's Your-own-CSV tab (or Excel) and re-run the example.
Common questions
Gross burn or net burn — which do I report?
Report net burn (cash out − cash in) as the headline: it's what determines how long the cash lasts. Show gross burn alongside when the audience wants to see the cost base separately from collections.
Is burn rate the same as net loss?
Close, but not identical. Net loss is an accrual P&L figure; burn is a cash figure. Non-cash items (depreciation, stock comp) hit the loss but not the burn, while capex and working-capital swings hit the burn but not the loss. Cash is what runs out, so runway math uses burn.
What's a good burn rate?
There is no good absolute number — the question is burn relative to balance (runway) and to growth. The discipline worth keeping is computing it the same way every month, which is exactly what a re-runnable query buys you.
Compute burn rate on your own export, every month
Free workspace: 10 questions/day, files up to 10 MB. Pro $15/mo ($99/yr) for 100 MB. Your files never leave your browser.
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Related terms
Runway
Months of cash left at the current burn — cash balance ÷ average monthly net burn.
Working capital
The cash tied up in running the business day to day — current assets minus current liabilities.
EBITDA margin
EBITDA as a percent of revenue — operating profitability before depreciation, amortization, interest and tax.