Burn rate

Burn rate is a measure of negative cash flow that describes the rate at which a company is spending capital to finance overhead before generating positive cash flow.

Burn rate is most often calculated per month; if a company has a burn rate of $100,000, that means it is burning through or spending $100,000 each month. Those funds may be going towards company necessities such as salaries, rentals, utilities, or communication as well as towards things like business build-out and fixed assets.

There are two types of burn rate:

  • Gross burn – the total amount of operating costs a company incurs in expenses each month.
  • Net burn ­– the total amount of money a company loses each month.