Definition
Net burn is what shrinks the bank balance and drives runway. Gross burn shows the size of the cost base, which is what you would have to cover if revenue stalled.
Formula
Gross and net burnNet burn = Cash out − Cash in (per month); Gross burn = Cash out
Example
Demo Co collects about $255K a month and spends about $417K. Net burn is roughly $162K a month.
Benchmarks
Read burn against growth (burn multiple) and against cash (runway), not on its own.
Common mistakes
- Calculating burn from the P&L instead of cash, which hides prepaid and deferred items.
- Using one unusual month as the run rate.
Examples use Demo Co, a fictional $3M ARR SaaS company, or a generic company where noted. Benchmarks are common reference points, not targets for every business.