Burn rate is the pace at which a business, typically a startup, spends its cash reserves, usually measured as net cash spent per month.
Burn rate measures how quickly a company is using up its cash, most relevant for startups and businesses operating at a loss before reaching profitability. Gross burn is total monthly cash spending; net burn is spending minus any revenue, the true monthly drain on reserves.
Burn rate is watched alongside runway, how many months of cash remain at the current burn. A high burn without a path to revenue or new funding is a warning sign, while managing burn extends the time available to reach profitability or raise capital.
A startup spends $80,000 a month and earns $30,000, so its net burn is $50,000 a month. With $300,000 in the bank, it has six months of runway before it must reach profitability or raise more funding.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
Book a Free 15-Minute CallCommon questions regarding our compliance workflows and service guarantees.