Burn Rate Formula: Gross vs Net Burn and Runway in Excel
Summary
Net burn rate = Cash out − Cash in per month; gross burn is cash out alone. Runway = Cash balance ÷ Net burn. A startup with $226,000 of monthly spending and $71,000 of monthly collections burns a net $155,000 each month, so $2.035M of cash lasts about 13.1 months.
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Burn rate formula
Net burn = Average monthly cash outflows − Average monthly cash inflows; Runway (months) = Current cash ÷ Net burn- Cash out (gross burn): All cash leaving the business in a month: payroll, rent, vendors, cloud costs, loan repayments.
- Cash in: Cash actually collected from customers and other operating sources in the month. Excludes new equity or loans.
- Cash balance: Cash and cash equivalents at the end of the latest month.
How to calculate burn rate in Excel and Google Sheets
Excel, using the cells in the worked example below:
=AVERAGE(C2:C4)-AVERAGE(B2:B4)Worked example
A seed-stage B2B startup prepares its quarterly board update and needs net burn and runway from its bank-based cash report.
| Month | Cash in | Cash out | Ending cash |
|---|---|---|---|
| July | $62,000 | $218,000 | $2,344,000 |
| August | $71,000 | $224,000 | $2,191,000 |
| September | $80,000 | $236,000 | $2,035,000 |
- Average gross burn = (218,000 + 224,000 + 236,000) ÷ 3 = $226,000 of monthly spending.
- Average cash in = (62,000 + 71,000 + 80,000) ÷ 3 = $71,000 of monthly collections.
- Net burn = 226,000 − 71,000 = $155,000 of average monthly net burn; check: 155,000 × 3 = 465,000, the fall in cash from $2,500,000 to $2,035,000.
- Runway = 2,035,000 ÷ 155,000 = 13.1 months. In Excel: =D4/(AVERAGE(C2:C4)-AVERAGE(B2:B4)).
Result: $155,000 net burn per month; runway of about 13.1 months
How to interpret burn rate
Net burn tells you how fast cash is shrinking; runway tells you how long you have. Many founders plan to start fundraising with at least 9–12 months of runway left, because raises often take several months. A three-month average smooths one-off payments like annual software renewals. Watch the direction: here cash in is rising faster than cash out, so net burn is roughly flat even though gross burn grew. Recalculate runway with your planned hires, not just past spend, since forward runway is what matters.
Common mistakes
- Counting new funding or loan proceeds as cash in. That hides the operating burn the round is supposed to cover.
- Using accrual-based expenses from the P&L. Burn is a cash measure; prepaid annual contracts and slow-paying customers make the two differ.
- Projecting runway from current burn when hires are already approved. Model the burn you will have, not the burn you had.
- Using a single month. One large invoice collected or paid can swing net burn by tens of percent; average at least three months.
Calculate burn rate with Better Analyst
Connect your data or upload a spreadsheet, then ask in plain English. Better Analyst writes and runs the calculation and shows the steps, so you can check the number.
- “Calculate gross burn, net burn and runway for each month this year from our bank export.”
- “What will runway be if we add four engineers costing $14,000 each per month from January?”
- “Alert me when the three-month average net burn rises above $180,000.”
Usually calculated from: Google Sheets, OneDrive, PostgreSQL, Google BigQuery, Snowflake.
Further reading
Frequently asked questions
What is the difference between gross burn and net burn?
How do I calculate runway in Excel?
Should burn rate include one-off costs?
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