What is Burn Rate?

Burn rate is the rate at which a company is losing money. It is especially critical for startups and early-stage companies that are not yet profitable. Burn rate helps in determining the company's runway, which is the amount of time it can continue to operate before it runs out of cash.

For Startups: Founders and investors closely monitor the burn rate to ensure the company has enough cash to reach its next milestone, such as launching a product or securing the next funding round. A high burn rate can be a red flag if it is not justified by significant growth or strategic investments. You can calculate yours using our Burn Rate Calculator.

For SaaS: SaaS companies often have a high initial burn rate due to significant upfront investments in product development and customer acquisition. The focus is on ensuring that the burn rate leads to a substantial increase in Monthly Recurring Revenue (MRR) and a strong LTV:CAC ratio.

Calculation: Net Burn Rate = (Cash at the beginning of the period - Cash at the end of the period) / Number of months in the period. For instance, if a company's cash balance drops from ₹1 Crore to ₹70 Lakhs in a quarter, its monthly net burn rate is ₹10 Lakhs.