Revenue Metrics

Burn Rate: Net Monthly Cash Spend

How much net cash the business consumes each month after revenue.

Definition

Burn rate is the rate at which a business consumes cash. Gross burn is total monthly expenses; net burn is total monthly expenses minus monthly revenue (and gross margin contribution). Burn divided by cash on hand gives runway.

Formula

Net Burn = Total Monthly Expenses − Total Monthly Revenue

Net Burn = Monthly Expenses − Monthly Revenue

Worked example

£200k monthly expenses, £100k monthly revenue: net burn is £100k/month. With £2m cash, runway is 20 months. Without intervention, fundraise needs to close inside 14 months to leave a 6-month buffer.

Why it matters

Burn rate combined with cash in the bank gives runway, the single most consequential number for any pre-profit business. It drives hiring decisions, fundraising timelines and the urgency of every commercial commitment a revenue leader makes.

Common mistakes

  • Forecasting burn from gross margin contribution, not revenue
  • Failing to plan for non-monthly cash hits (annual SaaS renewals, payroll spikes)
  • Reporting gross burn when investors are asking about net burn

Related terms

ARRMagic Number

Read more in The Guide

Chapter: Understanding the P&L →

Sources & further reading

  • — Drawn from Evara's working definitions used on retained search and revenue advisory engagements (2024–2026).
  • — Reconciled against industry conventions in SaaStr, OpenView SaaS Benchmarks and Bessemer State of the Cloud.
  • — Reviewed by Rich Evans, Strategic Advisor at Evara and former operator/founder.

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