The rate at which a company spends its cash reserves, usually measured as net cash lost per month.
Net burn rate = cash spent in period − cash received in period (per month)
In a month you spend £600,000 across salaries, infrastructure, and overhead, and collect £200,000 in revenue.
£600,000 − £200,000 = £400,000 net monthly burn
Burn rate is how fast you are using up cash. The figure that matters most is net burn — total cash going out minus cash coming in — because it reflects the true monthly drain on your bank balance. Gross burn, by contrast, counts only what you spend and ignores revenue, so it overstates the danger for a company with meaningful income.
A business with £600,000 in monthly costs and £200,000 in revenue has a gross burn of £600,000 but a net burn of £400,000 — and it is the net figure that determines how long the money lasts. As revenue grows, net burn falls even if spending holds steady, and a profitable company has a negative net burn: its cash balance grows.
Burn rate is meaningless in isolation; it only matters next to your cash balance. The same £400,000 monthly burn is comfortable with £10M in the bank and an emergency with £800,000. That relationship — cash divided by burn — is your runway, the metric burn rate exists to feed.
Burn rate is the clock on every startup that is not yet profitable. It determines how long your funding lasts and therefore how much time you have to hit the next milestone or raise again. Managing it is the difference between fundraising from a position of strength and doing it with weeks of cash left.
There is no universal burn benchmark — it is judged against cash on hand (runway) and the ARR it buys (burn multiple). The common rule of thumb is to keep at least 12, ideally 18+, months of runway at your current net burn.
Gross burn is total cash spent in a period, ignoring revenue. Net burn subtracts cash received, so it reflects the real monthly drain on your balance. Net burn is the figure that drives runway.
Yes. A profitable company has a negative net burn — it generates more cash than it spends, so its balance grows rather than shrinks each month.
Burn rate measures cash spent over time; burn multiple divides that burn by net new ARR to judge how efficiently the spend is buying growth.
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