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What is a burn rate?

Burn rate is most often a consideration for young life sciences or technology companies without profits and, in some cases, without revenue. It is usually quoted in terms of cash spent per month. For example, if a company is said to have a burn rate of $1 million, it would mean that the company is spending $1 million per month.

What is a good burn rate for a startup?

The general recommendation is for a startup business to have six to 12 months of expenses on hand. 2 If the company has $100,000 in the bank, a good burn rate would fall between $16,667 (six months) and $8,333 (12 months). How do you calculate the burn rate? There are two kinds of burn rates: gross and net.

Does a burn rate need to be weekly?

The burn rate is commonly expressed in terms of months, but it doesn't need to be. When a company is experiencing a cash crisis, that company may need to calculate a weekly burn rate—or even a daily burn rate—to see how long it has to turn its financial situation around.

What does a positive net burn rate mean?

If the net burn rate is positive, then you're spending more money than you're taking in, and something needs to change. You either need to cut costs or increase revenue. Furthermore, you can compare your burn rate to your total funds to determine how long of a runway you have.

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