Learn how burn rate and runway are calculated, the difference between gross and net burn, and why runway is not a full cash forecast.
When a business spends more cash than it generates, two simple measures help frame the situation: burn rate describes the pace of cash consumption and runway estimates how long the available cash could last if that pace continued.
The burn rate and runway calculator combines these values, but the result is a scenario based on current assumptions rather than a prediction.
Gross burn usually focuses on cash operating outflows during a period.
Net burn looks at the net reduction in cash after operating inflows are considered. A simplified monthly approach is:
Net burn = cash outflows − cash inflows
If a company spends 100,000 during a month and receives 70,000, its simplified net burn is 30,000 for that month.
The exact definition should be documented because teams sometimes include or exclude financing flows, exceptional items or capital expenditures differently.
A simplified runway formula is:
Runway = available cash / net burn per period
If available cash is 300,000 and monthly net burn is 30,000, the simplified runway is 10 months.
That does not mean the company will certainly run out of cash in exactly ten months. Revenue may grow or decline, hiring may change, annual bills may create uneven outflows and financing may alter the cash balance.
One month can be unusually high or low. Looking at several recent periods may provide a more representative burn rate, especially when payments are irregular.
But a historical average can also hide a trend. If burn is increasing every month, an average of the last six months may overstate future runway.
A useful review therefore considers both the average and the direction of change.
A runway calculation assumes a relatively stable burn rate. A cash forecast models dated inflows and outflows.
The distinction matters when the business has:
In those situations, runway remains a useful headline indicator, but it should be read alongside a month-by-month cash plan.
Burn rate answers how quickly cash is being consumed. Runway turns that pace into an estimated duration. Together they are useful for monitoring, provided the assumptions remain visible and the estimate is not mistaken for a guaranteed future date.
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