Burn rate is how much cash your startup loses each month, and runway is how many months that cash will last before you hit zero. Divide your current cash by your monthly net burn and you get runway in months. If you have 300,000 dollars and burn 25,000 a month, you have 12 months of runway. These two numbers decide when you must raise, cut, or grow into profit. Growth Navigate startup tools can help you put it into practice.
What is the difference between gross and net burn?
Gross burn is your total monthly cash outflow, while net burn subtracts the revenue you bring in. If you spend 40,000 dollars a month and earn 15,000 in revenue, your gross burn is 40,000 and your net burn is 25,000. Net burn is the number that actually depletes your bank balance.
Founders should track both. Gross burn shows your true cost base and what cuts are possible, while net burn shows how fast you are heading toward empty. As revenue grows, net burn shrinks even if gross burn stays flat, which is the path toward break-even.
- Gross burn = total monthly cash spent
- Net burn = gross burn minus monthly revenue
- Net burn is the figure that drains your bank account
How do you calculate your runway in months?
Calculate runway by dividing your current cash balance by your monthly net burn. With 240,000 dollars in the bank and 20,000 in net burn, you have 12 months of runway. That single number tells you the date you run out of money if nothing changes, which is the most important date a founder tracks.
Runway is not static. Hiring, new marketing spend, or a churned customer all move it, so recompute it whenever spending shifts. A useful rule is to start raising your next round when you have six to nine months of runway left, since fundraising itself takes months and you never want to negotiate from desperation.
Why does runway shape every founder decision?
Runway sets the clock on every major decision, from hiring to fundraising to pricing. With 18 months of runway you can experiment patiently; with four months you must focus on revenue or a raise immediately. Knowing the number keeps you honest about how much risk you can actually afford.
Short runway narrows your options and weakens your negotiating position. Investors sense urgency and price it in, and rushed cuts damage morale. Watching runway early lets you act while you still have leverage. The founders who get caught off guard are usually the ones who never tracked it closely.
Which tools track burn and runway for you?
Track burn and runway with your banking and accounting tools, which hold the real numbers. Mercury, a startup bank, shows balances and cash flow and offers burn and runway views directly in its dashboard. QuickBooks and Xero handle your full accounting, categorizing expenses and revenue so your burn figures are accurate rather than guessed.
Baremetrics adds subscription revenue and churn data, which sharpens your net burn picture for SaaS businesses. Together these tools turn a fragile spreadsheet into a live view of your cash position. Growth Navigate also offers a free runway calculator at /runway-calculator so you can check your months of cash in seconds before opening the books.
- Mercury: startup banking with built-in burn and runway views
- QuickBooks and Xero: accurate expense and revenue accounting
- Baremetrics: subscription revenue and churn for net burn
FAQ
What is a healthy runway for an early startup?
Most founders aim to keep at least 12 to 18 months of runway after a raise. That window gives time to hit milestones before raising again. Start your next round near six to nine months left, since fundraising itself takes several months.
Should I track gross burn or net burn?
Track both. Gross burn shows your total cost base and where you can cut, while net burn, your spend minus revenue, shows how fast your cash actually drops. Net burn drives your runway calculation, so it is the number you watch most closely.
How do I quickly estimate my runway?
Divide your current cash by your monthly net burn to get runway in months. With 300,000 dollars and 25,000 net burn, you have 12 months. The free runway calculator at /runway-calculator does this instantly and shows how changes affect your timeline.
Stop reading lists — get a personalized startup tool stack in 60 seconds.
Build my startup stack