Introduction to the Burn Rate KPI
The Burn Rate KPI is one of the most important financial metrics for startups and growing companies. It measures how quickly a business spends its available cash, providing a clear view of financial health, operational sustainability, and runway.
What Is Burn Rate?
Burn Rate represents the amount of money a company uses each month to cover operating expenses. There are two main versions:
Gross Burn Rate = Total Monthly Operating Expenses
Net Burn Rate = Total Monthly Spending – Monthly Revenue
Net Burn Rate is especially useful because it shows the true cash outflow after accounting for revenue.
Why This KPI Matters
Burn Rate helps founders, managers, and investors assess whether a company is on a sustainable financial path. It provides insights into:
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Monthly cash consumption
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Operational efficiency and cost discipline
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Required revenue growth to reach profitability
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Startup “runway” — how many months the company can survive with current cash
A rising burn rate may signal overspending or aggressive scaling, while a stable or decreasing burn rate typically reflects improving financial management.
How to Use This KPI Effectively
Companies often monitor Burn Rate monthly to anticipate funding needs, adjust budgets, and optimize expenses. When combined with KPIs like Runway, Customer Acquisition Cost (CAC), and Revenue Growth Rate, it forms a complete picture of financial sustainability.