What is Burn Rate?
How fast your company spends cash each month. Important to track — especially when investor money starts running low.
Burn rate is how fast a company spends its money each month. The term literally means "burn pace" — how much cash you burn to keep the business running before revenue eventually covers costs. If every month you pay more in salaries, rent, and tools than comes in, the difference is your burn rate.
Think of cash as a full tank of fuel. Burn rate is how fast the needle drops as you drive. The higher the burn rate, the more often you need to refuel — either from your own revenue or with new money from outside. And just like with a car, you want to know how far you can go before the tank is empty.
Linked to burn rate is the concept of "runway" — how many months you can last before the money runs out, if nothing changes.
Why is burn rate important for your business?
Knowing your burn rate means knowing your survival odds. If you know you burn a certain amount each month and have a certain amount of cash, you also know exactly how long you have to become profitable or raise more capital. Without that visibility, money can run out faster than you can react.
It is especially important when investor money starts running low, or when you are investing in growth before revenue has caught up.
Burn rate in practice
Say your small company has £300,000 in the bank and each month £50,000 more goes out than comes in. Your burn rate is £50,000 per month, and your runway is six months. That means you have half a year to either increase revenue or cut costs — otherwise the tank is empty.
A practical tip is to calculate your burn rate and runway every month. Then it never becomes an unpleasant surprise, but a number you steer by.
Common questions about Burn Rate
What does burn rate mean?
Burn rate is how fast a company spends its money each month — how much more goes out than comes in. It shows how quickly cash is shrinking and how urgent it is to become profitable or raise more capital.
What is the difference between burn rate and runway?
Burn rate is how much money you burn per month. Runway is how many months your cash lasts at that pace. If you have £300,000 and burn £50,000 a month, your runway is six months.
How do you calculate burn rate?
Take how much money left the business in a month and subtract revenue for the same month. The difference is your burn rate. Calculate it every month to avoid unpleasant surprises.
Related terms
Roadmap
A plan showing where the product is heading. It shifts sometimes — but a good roadmap keeps everyone aligned.
Sprint
A short work period (usually 1–2 weeks) focused on specific tasks. Not to be confused with running — we mostly sit down.
Agile
A way of working where you adapt as you go instead of planning everything upfront. Like surfing instead of building a bridge.
MVP
Minimum Viable Product. The leanest version of your idea that actually works. Think: a skateboard before you build a Tesla.
Digital Agency
Like a web agency, but with more tools in the box. It does not just build the site — it helps people find it and like it.
Go-to-Market (GTM)
The strategy for actually getting your product to people. Great product + poor GTM = no profit.