Burn rate is the pace at which a business consumes cash, typically expressed as a monthly figure, and it determines how long the business can operate before needing additional revenue or capital.

Burn rate is most commonly associated with pre-revenue or early-stage businesses, but it is equally relevant for any business operating at a loss or funding growth through cash reserves. Gross burn is the total monthly cash outflow. Net burn is the monthly cash consumption after revenue is accounted for. The distinction matters: a business with $200,000 in monthly expenses and $150,000 in revenue has a net burn of $50,000 per month, the number that determines runway.

Knowing burn rate without knowing runway is an incomplete picture. The two together tell you how many months the current cash position can sustain operations at the current trajectory, and therefore how much time exists to reach profitability, close the next financing round, or implement a course correction before options narrow.

Burn rate and runway are the two numbers every business consuming more cash than it generates needs to know precisely. See how Wefinx approaches Virtual CFO services.

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