What is burn rate?
Burn rate is how much cash your company spends each month. Gross burn is total monthly spend. Net burn is gross burn minus the cash you bring in, so it is the cash you actually lose each month.
Burn rate on its own is not good or bad. It only means something against your cash balance, which is what turns it into runway.
The burn rate formula.
Net burn = monthly cash out minus monthly cash in. Gross burn = monthly cash out. A company spending 200,000 dollars a month with 50,000 dollars of revenue has a 150,000 dollar net burn and a 200,000 dollar gross burn.
Use cash actually in and out, not accrual revenue. Burn is a cash measure.
A worked example.
You spend 200,000 dollars a month and collect 50,000 in revenue. Net burn is 200,000 minus 50,000, which is 150,000 dollars a month. Gross burn is the full 200,000.
What is a healthy burn rate?
There is no universal number, because burn scales with stage and headcount. The question is not whether burn is high, but whether your cash covers enough months of it. A 150,000 dollar burn is fine with three years of cash and dangerous with four months. Convert it to runway to judge it.
Watch net burn against new ARR too. If burn is high but you are adding ARR efficiently, the spend may be justified. The burn multiple makes that call.
How to lower your burn rate.
Cut spend or raise revenue. The revenue side is usually the better lever, because cutting too hard slows growth.
A capital-efficient growth channel helps on both sides: it adds revenue without adding proportional spend. Organic search compounds, so it lowers your blended acquisition cost over time. See how we grow B2B SaaS pipeline efficiently.