1. What is Burn Rate Percentage?

Burn Rate Percentage is a financial metric that measures the rate at which a company is spending its cash reserves relative to its starting cash balance. It indicates how quickly a company is using up its available funds.

2. How Does the Calculator Work?

The calculator uses the Burn Rate Percentage formula:

Where:

• \( \text{Monthly Burn} \) — Total monthly cash expenditure (dollars)
• \( \text{Starting Cash} \) — Initial cash balance at the beginning of the period (dollars)

Explanation: This calculation shows what percentage of your starting cash you're spending each month, helping you understand your cash consumption rate.

3. Importance of Burn Rate Calculation

Details: Monitoring burn rate percentage is crucial for startups and businesses to manage cash flow, predict runway, and make informed decisions about fundraising and cost management.

4. Using the Calculator

Tips: Enter your total monthly cash burn and starting cash balance in dollars. Both values must be positive numbers to calculate the burn rate percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good burn rate percentage?
A: This varies by industry and growth stage, but generally, a lower percentage indicates longer runway. Startups often aim for burn rates that give them 12-18 months of runway.

Q2: How does burn rate percentage differ from gross burn rate?
A: Burn rate percentage shows spending relative to cash reserves, while gross burn rate is the absolute amount spent per month without context of available funds.

Q3: When should I be concerned about my burn rate?
A: When your burn rate percentage suggests you have less than 6 months of runway, or when it's increasing without corresponding revenue growth.

Q4: Can burn rate percentage be negative?
A: No, since both monthly burn and starting cash are positive values, the percentage will always be positive. A company with positive cash flow would have a burn rate of 0%.

Q5: How often should I calculate burn rate percentage?
A: Monthly calculation is recommended for active monitoring, with more frequent checks during periods of high spending or cash constraints.