Overview
In RunSmart, understanding your burn rate is critical to knowing how quickly your business is using its cash reserves. This is especially important for early-stage or fast-growing businesses that are investing heavily before turning a consistent profit.
We display two types of burn rate on your dashboard: Net Burn Rate and Gross Burn Rate. Here's what each means and how to interpret them.
🔥 What Is Gross Burn Rate?
Gross Burn Rate is the total amount of cash your business spends each month, regardless of income.
Formula:
Gross Burn Rate = Total Monthly Operating Expenses
Why it matters:
It gives you a clear view of your business’s monthly cash outflow—how much money is going out the door. It's especially useful for tracking how your spending changes as your business scales.
Example:
If you spend $50,000 a month on payroll, rent, and marketing, your gross burn rate is $50,000—even if you earn revenue.
🔥 What Is Net Burn Rate?
Net Burn Rate reflects how much money you're actually losing each month—how quickly your cash reserves are shrinking.
Formula:
Net Burn Rate = Monthly Cash Outflows – Monthly Cash Inflows
Why it matters:
This is your true burn rate—it tells you how long your business can keep operating before it runs out of cash, based on current performance.
Example:
If you spend $50,000 per month but only bring in $30,000, your net burn rate is $20,000. If you have $100,000 in the bank, you have 5 months of runway.
💡 Why Both Matter
Gross Burn Rate helps you evaluate spending habits and find areas to reduce costs.
Net Burn Rate shows your overall financial health and sustainability.
Tracking both gives a fuller picture of how fast you’re burning through cash—and how long you have to reach profitability, raise funding, or cut costs.
🧠 RunSmart Tip
RunSmart automatically calculates both burn rates using your connected financial data from QuickBooks Online. You’ll see them clearly visualized on your dashboard, along with Runway, which tells you how many months of cash you have left.