What is Burn Rate?
How fast a business spends money it hasn't earned yet, usually measured per month.
Burn rate is the speed at which a business consumes its cash reserves. 'Gross burn' is your total monthly spending; 'net burn' subtracts any revenue coming in. A startup with $50,000/month of costs and $20,000/month of revenue has a net burn of $30,000.
The word is borrowed from fuses, and it's honest about the situation: something is being consumed and it will run out. Burn rate and runway are two sides of the same coin — runway = cash ÷ net burn — so cutting burn instantly buys you time.
A high burn rate isn't automatically bad. It's fine while it's buying something: customers, a product, a market position. It's not fine when it's buying time to decide what to do — or kombucha taps and vanity, which is just an expensive way to run out of money.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.