# Burn Rate

Date created: Oct 12, 2022  •   Last updated: Sep 21, 2023

## What is Burn Rate?

Burn Rate measures the rate, expressed as a percentage, at which money raised through external funding is spent. It is mainly used by start-ups to track the speed of spending over time and estimate the cash needed for operations and growth. It can be calculated either as Gross Burn Rate or Net Burn Rate.

### Burn Rate Formula

ƒ Sum(Net Burn in First Time Period) - Sum(Net Burn in Second Time Period) / Sum(Net Burn in First Time Period)
ƒ Sum(Gross Burn in First Time Period) - Sum(Gross Burn in Second Time Period) / Sum(Gross Burn in First Time Period)

### How to calculate Burn Rate

In January, a start-up has \$200,000 in operating expenses and generates \$100,000 in revenue. Next month, the start-up spends \$150,000 on operating expenses and generates \$100,000 in revenue again. January’s Net Burn is \$100,000, February’s Net Burn is \$50,000; therefore the Burn Rate in February is (\$100,000 - \$50,000) / \$100,000 = 50%.

### Start tracking your Burn Rate data

Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data. 