How to calculate burn rate and runway

Burn rate is how much cash you lose each month. Runway is how many months you can keep going before the bank account hits zero. Here are the formulas with one example worked through.

The example company below is made up so the math is easy to follow.

The example

You have $90,000 in the bank. Each month you spend $12,000 on salaries, tools and hosting, and bring in $5,000 of revenue at an 80% gross margin.

Gross burn

Gross burn = total cash going out each month. Here that's $12,000. It's what you'd lose if revenue dropped to zero, which makes it a useful worst case.

Net burn

Net burn = cash going out − cash coming in. $12,000 − $5,000 = $7,000 a month.

A stricter version only counts what you keep from revenue after hosting, payment fees and support: $12,000 − ($5,000 × 0.8) = $8,000. That's the version the SaaS metrics formulas page uses. Pick one and use it every month.

Runway

Runway (months) = cash in the bank ÷ net burn. $90,000 ÷ $7,000 is about 13 months. With the stricter net burn it's $90,000 ÷ $8,000, about 11 months.

If net burn is zero or negative, you're not losing cash and runway has no limit.

When revenue is growing

The simple formula assumes this month repeats forever. If revenue grows each month, net burn shrinks and real runway is longer. If you're hiring, it's shorter. For anything beyond a rough check, project month by month: start with your cash, subtract that month's net burn, and find the month it goes below zero.

Common mistakes

• Using last month alone. Annual bills and one-off costs make single months noisy, so average the last three.
• Forgetting money that's promised but not in the bank. Only count cash you actually have.
• Leaving out taxes, annual software renewals and your own pay.
• Waiting too long. Fundraising often takes months, so many founders start well before runway gets short.

Run your own numbers

The free runway and LTV calculator does this math for your inputs. For the customer side, see how to calculate churn and CAC payback.

Want the full model?

The Founder Unit Economics Pack ($39) is an Excel and Google Sheets workbook with a 12-month MRR projection, runway with a zero-cash date, and side-by-side scenarios.