Net Burn
The net amount of cash a company consumes from operations each month after subtracting the revenue it generates from its total operating spend.
◆ Currency
Formula
Built from
What it measures
The true monthly cash consumption that remains after revenue offsets part of the company's total operating spend. Gross Burn shows everything going out the door; Net Burn nets revenue back in to show what the business actually depletes from the bank each month. It captures both the scale of operations and the efficiency with which spend converts into revenue, and it is the direct input to runway and funding-need calculations.
Why it matters
Net Burn is the number that governs survival. It is the denominator of runway (cash balance divided by Net Burn) and the baseline for every fundraising conversation and board update — investors size a round to give you a target number of months at your current Net Burn. It is also one half of the Burn Multiple efficiency story: how much cash you burn relative to the recurring revenue you add. A company can post strong growth and still be uninvestable if its Net Burn is consuming cash faster than the runway allows.
How to read it
Read Net Burn as a trend, never as a single month, and always alongside cash balance and revenue growth. A Net Burn of $100K/month is existential on $500K of cash (five months) but routine on $3M (thirty months). Trend it month over month: a Net Burn that shrinks as revenue scales signals operating leverage; a Net Burn that climbs faster than revenue signals deteriorating unit economics. Normalize it against the recurring revenue you are adding — burning $100K/month to add $120K of annual recurring revenue is a Burn Multiple of roughly 10x, far above the sub-1x to 2x that disciplined SaaS targets. A negative Net Burn means revenue exceeds operating spend: you are cash-flow positive from operations.
What good looks like
Good
Net Burn declining month over month as revenue scales and operating leverage builds, with a visible path to operational breakeven inside 18-24 months and ample runway against current cash.
Watch
Net Burn flat or rising while revenue growth fails to keep pace, Burn Multiple drifting upward, and runway tightening toward the next raise.
Bad
Net Burn accelerating or persistently high despite revenue growth, no credible path to breakeven, and runway compressed below the window investors are comfortable funding.
Watch-outs
- Judging Net Burn without revenue growth in view. A rising Net Burn can be perfectly healthy if revenue is rising faster. Always normalize it against net new recurring revenue (the Burn Multiple, target sub-1x to 2x for maturing SaaS) before calling it a problem.
- Treating P&L burn and cash burn as the same number. Accrual items — depreciation, stock-based compensation, deferred revenue — drive a wedge between the two. Companies are routinely P&L-profitable but cash-flow negative, or the reverse. State which definition you are using and reconcile it to actual cash spent.
- Mistaking negative Net Burn for a problem. When revenue overtakes operating spend, Net Burn goes negative — that is operational profitability, a milestone to report, not a calculation error.
- Forecasting runway off a single month. One heavy month overstates burn and one light month hides structural drift. Use a trailing three-month or trailing twelve-month average of Net Burn for runway and trend work.
Worked example
Hypothetical
A company runs $200K of monthly operating expenses and generates $80K of revenue, so its Net Burn is $120K/month. With $1.2M of cash in the bank, that is ten months of runway. If it trims operating expenses to $150K/month, Net Burn falls to $70K/month and runway stretches to roughly seventeen months on the same cash balance.
Variants & windows
The same metric re-expressed by a mechanical transform — a trailing window, a growth rate, a per-unit scaling, or a book/segment cut. Each is computed from Net Burn above.
- Net Burn Growth Rate Growth rate
- T12M Net Burn Trailing 12-month
- T3M Net Burn Trailing 3-month