What is Net Burn vs Gross Burn?
Nexa Consultancy | Startup & Finance Glossary
Gross Burn is the total amount of cash a startup spends in a month. Net Burn is the true measure of cash depletion, calculated as cash spent minus cash received.
For Startups: This is the most critical operational metric. It directly impacts your runway and survival. While investors look at Gross Burn to understand operational costs, they manage the business based on Net Burn.
For SaaS: In a SaaS context, Net Burn is especially crucial as upfront annual contract payments can temporarily mask a high Gross Burn, giving a false sense of security. Tracking both provides a clearer picture of cash flow health.
Calculation: Net Burn = (Cash at Start of Month - Cash at End of Month)
Example: A startup spends ₹20 Lakhs (Gross Burn) and earns ₹5 Lakhs in a month. Its Net Burn is ₹15 Lakhs.