Burn rate is how much cash leaves the business each month. Gross burn is everything going out. Net burn subtracts what comes in, and it is the only one of the two that tells the truth about your position. Gross burn is what you spend. Net burn is what it costs you to keep existing.
Net burn = monthly cash out − monthly cash in · Gross burn = monthly cash out
Splits your monthly spend into gross burn (every dollar out) and net burn (after subtracting revenue). The two numbers most founders confuse. Quote net for everyday runway planning. Quote gross when investors are stress-testing what happens if revenue disappears. Knowing which to use, and when, separates founders who survive from founders who get caught off-guard.
Your numbers
Total monthly outflow: salaries, tools, infra, ads. Gross burn.
Total monthly inflow: paid revenue, refunds-in. Excludes raised capital.
The verdict
Gross burn: $30.0K
Burning but earning. Plan against net burn, not gross: gross flatters your fears in the same way gross revenue flatters your hopes.
What the number means
| Net burn position | Reading | What to do about it |
|---|---|---|
| Net burn of zero or less | Healthy | Cash-flow positive. You are funding the business out of the business, which is the point of the whole exercise and rarer than the internet suggests. |
| Burning, with no revenue at all | Act now | Pure burn. Nothing offsets the outflow, so every month costs exactly what it costs and buys only what you learn. Make sure you are learning. |
| Burning, with some revenue | Fragile | Burning but earning. Plan against net burn, not gross: gross flatters your fears in the same way gross revenue flatters your hopes. |
Worked examples
| Situation | Numbers in | Answer out | Verdict |
|---|---|---|---|
| Pre-revenue, two founders | Out $12,000 · In $0 | $12,000 net burn | Pure burn. Every month is bought with savings and must return an answer. |
| Early traction | Out $30,000 · In $8,000 | $22,000 net burn | Burning but earning. Gross burn of $30,000 overstates the hole by a third. |
| Nearly break-even | Out $45,000 · In $43,000 | $2,000 net burn | Two thousand dollars from self-funding. One price rise closes it. |
| Profitable | Out $20,000 · In $26,000 | -$6,000 net burn | Negative burn, which is the accountant's charmless phrase for making money. |
How this is calculated
Gross burn = monthly_cash_out.
Net burn = monthly_cash_out − monthly_cash_in.
The runway calculator uses net, not gross. Quoting gross to investors or to yourself makes the business look more capital-hungry than it is, and double-counts the runway your revenue already covers.
This is the standard convention from Y Combinator's office hours and Brad Feld's Venture Deals. Net burn × 1 month = runway depleted; gross burn × 1 month = wasted self-talk.
What this doesn't tell you
- Whether the burn is the right shape. $30K split 90% on payroll vs 90% on ads has different leverage. Two startups with identical net burn can have very different odds.
- Whether it's accelerating. Net burn this month doesn't tell you the trajectory. If your last 3 months were $5K → $8K → $12K, your runway is shorter than the snapshot suggests.
- Whether it's the right burn. Sometimes the right move is to burn faster (more hires, more growth experiments) and sometimes it's to cut. The number alone doesn't decide.
What is a good burn rate for a startup?
There is no good burn rate in the abstract, only a burn rate that is justified by what it buys. The useful test is the burn multiple: divide net burn by net new recurring revenue added in the same period. Under one is excellent, under two is respectable, and above four means you are buying growth at a price the market will not refinance. A $50,000 monthly burn is prudent for a team shipping and selling, and reckless for one still deciding what to build.
Should I use gross burn or net burn?
Net burn, for anything involving decisions. Gross burn is the correct number when you are asking how much the machine costs to run, which matters for cost-cutting conversations. Net burn is the correct number for runway, hiring and fundraising, because it accounts for the customers already paying you. Confusing the two is the most common arithmetic error in early-stage board decks, and it always errs towards panic.
Does money we raised count as cash in?
No. Investment is financing, not income, and folding it into cash in makes a burning company look briefly profitable. Cash in means money from customers. Keeping the two separate is the difference between knowing whether the business works and knowing only that somebody once believed it might.
Put this on your own site
Free to embed, no permission needed, no tracking script smuggled in. The only condition is the credit link that comes with it, which seems a fair trade for the arithmetic.
<iframe src="https://shipfit.ai/calculators/embed/burn-rate" width="100%" height="560" style="border:1px solid #e2e8f0;border-radius:16px;" title="Burn rate calculator by ShipFit" loading="lazy"></iframe>Use this with
The Lean Startup
Validated learning, the build-measure-learn loop, what an MVP actually is, the three engines of growth, and the ten pivots Ries names rather than one.
Pricing Validation
Most founders pick a price by looking at competitors and shaving 20%. That's not pricing strategy, it's matching. Real pricing validation produces a price you can defend against your own ego and your buyer's pushback.
How long does startup validation take?
Two to four weeks of focused work for a single idea. Stage 1 (market verdict) takes a day. Stages 2-3 (buyer + pain) take a week of interviews. Stage 4 (positioning) takes two days. Stage 5 (V1 scope) takes a day. Stages 6-7 (pricing + behavioral evidence) take 1-2 weeks because you need 20+ buyers and a Fake Door Test running. ShipFit compresses the decision time to 30-60 minutes; the gating work is the human conversations between stages.
CAC / LTV ratio calculator
Does each customer make you money? Or cost you money?
Buyer Persona
A research-based archetype of a real buyer in a specific market segment, used to align product, pricing, and positioning decisions. Coined by Tony Zambito in 2002. Methodology formalized by Adele Revella in 'Buyer Personas' (Wiley, 2015).
Frequently asked questions
What's the difference between gross and net burn?
Why does this matter for a pre-revenue startup?
Should I add back deferred revenue?
What burn rate should I target?
Burn is only frightening in the dark.
The problem is rarely the number. It is not being able to say what the number bought. ShipFit turns the spending into nine decisions with evidence attached, so each month has something to show for itself.