How do I calculate burn rate and runway?

Net burn is your monthly cash expenses minus monthly cash revenue; runway is your cash balance divided by net burn. For example, $1.8M in the bank with $220k of monthly expenses and $100k of collections gives a net burn of $120k and 15 months of runway. Use a trailing three-month average of actual cash movement rather than a single month, since prepayments and one-off costs make individual months lumpy.

What is a good runway for a startup?

The directional 2026 norm is to raise to 18–24 months of runway and to start your next fundraise with at least 12 months left, since a raise typically takes 3–6 months end to end. Anything under 6 months is critical and calls for a bridge, deep cost cuts, or an exit conversation. More runway also means better negotiating leverage on terms.

What is the difference between gross burn and net burn?

Gross burn is your total monthly cash outflow — payroll, rent, tools, everything you spend. Net burn subtracts the cash you collect from customers, so it reflects how much your bank balance actually drops each month. Runway should always be calculated from net burn, and a profitable company has zero or negative net burn.

Is burn rate the same as operating expenses?

No. Operating expenses are an accrual accounting figure that spreads costs over the periods they relate to, while burn rate measures actual cash leaving the bank. An annual software prepayment hits opex evenly across 12 months but hits your burn entirely in the month you pay it. Always calculate burn from cash movement, not the income statement.

Does growing revenue change my runway?

Yes — the simple runway formula assumes net burn stays flat, so if MRR is growing your actual runway is longer than the static number, and if you are hiring it is shorter. Best practice is to model known changes like planned hires and expected collections rather than banking on optimistic growth. Treat the static figure as your conservative baseline.

SaaS Metrics

Burn Rate & Runway Calculator

Net burn and months of runway, with a hiring-plan scenario to stress-test your cash.

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What burn rate and runway actually measure

Burn rate is how fast you spend cash. Gross burn is your total monthly cash outflow — payroll, rent, tools, everything. Net burn is gross burn minus the cash you collect, and it is the number that matters: it is how much your bank balance actually drops each month. Runway is how many months you can keep operating at that pace — cash in the bank divided by net burn.

Most SaaS metrics are optimization problems. Runway is a survival problem. A company with a mediocre Rule of 40 score can fix it over a few quarters; a company with three months of cash cannot. Runway also sets your negotiating position — founders who open a raise with 12+ months left get materially better terms than founders raising against a deadline.

The formula, worked through

Net burn = monthly cash expenses − monthly cash revenue
Runway (months) = cash balance ÷ net burn

Say you have $1.8M in the bank, spend $220k a month, and collect $100k a month from customers:

Gross burn = $220k/month
Net burn = $220k − $100k = $120k/month
Runway = $1,800,000 ÷ $120,000 = 15 months

Now stress-test it. Two senior hires at $15k/month fully loaded, starting in month four, push net burn to $150k — runway compresses from 15 months to roughly 12.5. The calculator's hiring-plan scenario runs this math for you, so you see the cash cost of a headcount decision before you commit to it.

What's a good runway?

There is no published median for runway the way there is for NRR, but operator practice has converged on clear bands — treat these as directional 2026 norms, not hard rules. The standard playbook: raise to 18–24 months, start the next process with at least 12 left, and treat anything under 6 as an emergency. Fundraises routinely take 3–6 months end to end.

Runway	Read	Typical move
24+ months	Strong — default-alive territory	Invest in growth if efficiency metrics support it
18–24 months	Healthy post-raise position	Execute the plan; revisit quarterly
12–18 months	Fine, but the clock is audible	Decide: grow into a raise, or cut to default-alive
6–12 months	Raising window	Be actively fundraising or actively cutting burn
Under 6 months	Critical	Bridge, deep cuts, or an exit conversation

Runway tells you how long you can live, not whether the spend is efficient — pair it with the Magic Number calculator for that, and sanity-check the rest of your stack against the 2026 SaaS benchmarks.

Common mistakes

Using accrual numbers. Burn is a cash metric. Your P&L spreads an annual software prepayment over 12 months; your bank account paid it all in January. Work from bank-statement movement, not the income statement.
Taking one month at face value. Annual prepayments from customers and one-off costs make single months lumpy. Average net burn over the trailing three months.
Counting booked ARR as cash. A $50k annual contract billed upfront is one cash event, not $4.2k of monthly collections. Reconcile against your MRR & ARR before plugging revenue in.
Assuming burn stays flat. Static runway ignores planned hires, churn, and rising infrastructure costs. Model the changes you already know are coming — that is exactly what the hiring scenario is for.

See all 2026 SaaS benchmark tables →

Frequently asked questions

Related calculators

Rule of 40

Growth rate + profit margin, including the weighted variant — do you clear 40%?

MRR / ARR

Turn plans, seats and billing terms into clean MRR and ARR — including net-new MRR after churn.

Magic Number

Sales efficiency: new ARR generated per dollar of prior-quarter sales & marketing spend.

NRR

Calculate NRR from expansion, contraction and churn — and see how it compares to SaaS benchmarks.