Burn Rate
Definition
The rate at which a company spends cash in excess of its income, typically expressed as a monthly figure. Burn rate is a critical metric for startups and growth-stage companies, directly determining how long the business can operate before requiring additional capital (runway).
Related Terms
Related FAQ
What are realistic burn rates and how do you avoid misrepresenting runway?
Founders often calculate optimistic runway (assuming perfect cost control) when actual burn is higher. Honest runway = (cash on hand) / (conservative monthly burn + 3-month buffer).
Read full answer →Burn rate is monthly cash spending; runway is current cash divided by monthly burn rate, indicating how many months until capital runs out.
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