Gross Burn
Total cash a business spends on operating expenses in a period, before any revenue or other inflows are subtracted.
◆ Currency
Formula
Built from
What it measures
The absolute sum of every operating cash cost — delivering the product, acquiring customers, building product, and running the company — in a reporting period, with no reduction for revenue or any other inflow. It is the gross side of the burn equation: how much cash leaves the bank each month regardless of how much comes in. Typically measured monthly and annualized to size runway.
Why it matters
Gross burn is the speedometer for how fast the company spends. Paired with cash on hand and revenue, it determines runway — how many months you can operate before the bank account hits zero without a raise or reaching profitability. It is the hard constraint on survival, so investors and boards watch it more closely than almost any other number: a great growth story dies the day cash runs out. Tracking gross burn (not just net) also isolates the spending decision from the revenue decision, so you can see whether cost discipline is improving even while revenue swings.
How to read it
Read gross burn against cash on hand and revenue, never alone. Runway in months equals cash divided by net burn (gross burn minus revenue), so a high gross burn is only dangerous relative to the cash and revenue behind it: $1M/month is fatal pre-revenue and routine for a company doing $3M/month. Watch the trend — gross burn rising faster than revenue means unit economics are getting worse, even if the absolute number looks fine. Always project burn forward 3-12 months on your current hiring and spend plan to find the month cash gets tight, because a single snapshot tells you nothing about where the line is heading.
What good looks like
Good
Gross burn flat or falling as a share of revenue while the company scales. Burn that is a moderate and declining fraction of ARR as the business matures past product-market fit, paired with runway comfortably above 18 months.
Watch
Burn rising relative to ARR, or consuming a large share of ARR for a growth-stage company. Runway between 12 and 18 months with no committed next round signals it's time to act.
Bad
Gross burn accelerating while revenue stalls, burn consuming most or all of ARR, or runway below 12 months with no clear path to profitability or a next raise.
Watch-outs
- Including non-cash expenses in the number. Depreciation, amortization, and stock-based compensation are real costs but not cash leaving the bank, so they don't affect runway. Strip them out for burn; include SBC only if and when options are actually cashed out.
- Reading gross burn without revenue. A $1M gross burn against $500K revenue is a very different company than $1M against $50K — the first has months of runway the second doesn't. Always pair gross burn with revenue to get net burn and runway.
- Treating burn as a fixed line. Every hire, price change, and infrastructure scale-up moves it. A snapshot is useless for capital planning; project burn forward on the actual hiring and spend plan and re-forecast monthly.
- Burning on unvalidated bets. High burn is only defensible when it buys measurable traction — user growth, pipeline, revenue. Audit spend each month so every dollar maps to an outcome, not a vanity project or a channel you haven't proven.
Worked example
Hypothetical
In March a company spends $150K on COGS (hosting and support), $200K on sales and marketing (salaries, ads, commissions), $250K on R&D (engineering and product payroll and tools), and $100K on G&A (finance, HR, facilities). Gross burn for the month is $700K — regardless of how much revenue came in.