Monthly Burn Rate

It is how much cash your business loses per month when spending beats deposits — the speed you are going through money.

Formal definition

Monthly burn rate equals the absolute value of net monthly cash flow when cash flow is negative; it is zero when cash flow is positive.

Why it matters

Burn rate divided into cash on hand gives runway — the countdown until cash runs out.

Where you see it

• Startup board decks
• Venture capital updates
• Turnaround planning
• Cash crisis workshops
• Nonprofit grant reporting

Worked example

1. Net monthly cash flow: −$8,000.
2. Burn rate = $8,000/month.
3. Cash on hand: $48,000.
4. Runway ≈ $48,000 ÷ $8,000 = 6 months.
5. Interpretation: At this burn, cash lasts about six months.

How Business metrics calculates it

Absolute value of net monthly cash flow when money out exceeds money in; otherwise 0.

Where people fool themselves

Burn of $0 because deposits exceeded withdrawals does not mean you are safe; it means this month was fine. A contractor with one draw can print $0 burn and still be one missed inspection from panic.

Run it on your own numbers: any industry calculator.