Net Burn

TL;DR

Monthly cash outflow minus cash inflow — the actual rate at which the cash balance is depleted.

Net burn is the change in cash balance per month. It's the most operationally meaningful burn metric because it's what divides cash on hand to compute runway. A company with $10M in the bank and $500K monthly net burn has 20 months of runway; the gross burn might be much higher but is offset by revenue.

Net burn can swing materially with large customer payments, refunds, or one-time fees. Smoothing across multiple months gives a more honest picture.

Formula

Net Burn = Cash Out − Cash In

• Cash Out — All operating cash outflows: payroll, vendors, rent, etc.
• Cash In — All operating cash inflows from revenue (excluding new financing)

Net burn is what runway and burn-multiple are calculated from. Gross burn ignores revenue — useful for stress-testing 'what if revenue goes to zero.'

Worked example

Monthly cash out $720k, cash in $310k from customer payments. Net burn = $410k/mo — the actual rate the bank balance shrinks each month.

Common pitfalls

• Reporting net burn for a single anomalous month.
• Confusing net burn with cash flow (which has different timing conventions).
• Ignoring how net burn shifts with annual prepayments.

When this shows up in a pitch deck

Net burn appears on the Financials slide and is the input to runway math.

Related terms

• Gross Burn — Total monthly operating cash outflow before subtracting any revenue or financing inflow.
• Burn Rate — The rate at which a company spends cash, typically reported monthly. Reported as either gross burn or net burn.
• Runway — The number of months the current cash balance will last at the current net burn rate before the company runs out of money.
• Burn Multiple — Net new ARR divided by net burn — the dollars of capital consumed per dollar of new ARR generated.
• Rule of 40 — A SaaS health benchmark: revenue growth rate plus profit margin should sum to at least 40%.

Use this in your next pitch deck

Deckmetric scores your pitch across 10 VC frameworks and against 8 investor types. Upload your deck for an instant analysis, or check the startup valuation calculator to benchmark your raise.