Glossary · UK
What is Burn Rate?
The rate at which a business, typically an early-stage or loss-making one, spends its cash reserves each month.
Full Definition
Burn rate is the speed at which a business spends its available cash, usually expressed as an amount per month, and it is a metric used most commonly by early-stage, venture-backed or otherwise loss-making businesses that are spending more cash than they bring in from revenue while they grow. "Gross burn" refers to total cash outflow each month, while "net burn" nets off cash coming in from sales, so net burn is usually the more meaningful figure for understanding how quickly a business is actually depleting its bank balance. Burn rate is most useful when read alongside cash runway (the number of months of cash remaining at the current burn rate), since founders, boards and investors use both figures together to judge when a business will need to raise further funding, cut costs, or reach profitability before its cash runs out. A rising burn rate is not automatically a problem -- it can reflect a deliberate, well-funded push to grow faster -- but an unplanned or accelerating burn rate with no clear plan to reduce it or extend the runway is one of the clearest early warning signs of cash flow trouble in a growing business.