There is no universal dollar figure for a good burn rate. A $200K month is comfortable for a company sitting on three years of cash with a clear path to breakeven, and alarming for one with seven months in the bank and a raise it has not started. The number on its own tells you almost nothing. A burn rate is good or bad only relative to the runway it leaves and what you need to accomplish before that runway ends.
So the useful question is not "is our burn too high?" in the abstract. It is: how many months does this burn leave us, and is that long enough to reach the next thing that changes our situation, whether that is profitability, a funding round, or a contract that resets the maths?
Before you can ask whether your burn is healthy, you need to answer two prior questions: exactly what did we spend last month net of revenue, and how many months of cash does that leave. If your books are weeks behind, both answers are estimates, and you are making the biggest decision in the business on a guess.
Gross burn vs net burn
These two get used interchangeably and they should not be. Getting them straight is most of the work.
- Gross burn is total cash going out the door each month: payroll, rent, software, everything. It ignores revenue entirely.
- Net burn is gross burn minus the cash coming in from revenue. This is the number that actually drains your bank account.
Net burn is what you divide into your cash balance to get runway, so it is the number that governs survival. But gross burn is worth watching as a fragility check. A company covering a high gross burn with lumpy or concentrated revenue is more exposed than its net number suggests, because gross burn is where net burn lands if that revenue stops.
A worked example
Say you spend $250K a month and collect $100K a month in revenue, with $2.7M in the bank. Gross burn is $250K, net burn is $150K, and runway is $2.7M divided by $150K, or 18 months. Now lose that revenue, say a single large customer churns:
| With $100K/mo revenue | If that revenue stops | |
|---|---|---|
| Cash out (gross burn) | $250K/mo | $250K/mo |
| Cash in | $100K/mo | $0 |
| Net burn | $150K/mo | $250K/mo |
| Runway on $2.7M | 18 months | 10.8 months |
Runway collapses from 18 months to under 11 without a single new hire and without one line of spending changing. That is the point of watching both numbers: your gross burn is the runway you fall back to when revenue disappoints, and revenue concentration decides how likely that fall is.
How much runway should your burn leave?
This is where a good burn rate gets defined, and the honest answer is that it depends on how you intend to fund the business. For a company that plans to raise, the benchmark most commonly cited comes from Kruze Consulting, which does the books for hundreds of venture-backed companies: it advises early-stage companies to plan for at least 18 months of runway, and to start planning the next raise once about 12 months remain, rather than waiting until the cash is nearly gone (Kruze Consulting, guidance current as of 2026).
The reason 18 months is a floor rather than a comfortable target is worth sitting with. Carta's data on its own customer base showed the median interval between a seed round and a Series A reaching 616 days in Q2 2025, a little more than 20 months, and more than two months longer than the median two years earlier (Carta, published September 2025). Read those two numbers together and the tension is obvious: the widely-repeated 18-month minimum is now shorter than the median gap between rounds. A burn rate that leaves exactly 18 months is not buying you slack. It is putting you slightly behind the typical pace.
That does not mean 18 months is wrong, or that every company should hold 24. It means the number is a planning input, not an answer. A company with revenue growing into breakeven needs less cushion than one with no revenue and a long build ahead. What generalises is the shape of the reasoning, not the figure: pick the milestone that changes your position, work out honestly how long it takes to reach it, add time for the raise itself, and then ask whether your current burn fits inside that. If it does not, the burn is too high for your plan, whatever the raw number looks like.
Both halves of this calculation are only as trustworthy as the books underneath them. Net burn computed from a ledger that is a month stale can hide a runway problem until it is a crisis, and stale books tend to understate burn, because the bills that have not been entered yet are still bills. Current books mean the runway number in your board deck is the real one.
What actually moves burn
If the burn needs to come down, the levers are not equal, and they are rarely the ones that feel symbolically satisfying.
- Payroll, by a distance. Kruze's analysis of more than $900M of startup spending found payroll-related costs made up 76% of total operating expenses for venture-backed startups, or 68% including cost of goods sold (Kruze Consulting, November 2024). Headcount pace, not the software subscriptions, is the lever that moves the number.
- The timing of growth spend. Sales and marketing that has not paid back yet raises burn now and revenue later. Investing ahead of revenue is normal and often correct. Knowing how far ahead you are is the part that needs a number, and that is what the burn multiple is for.
- Revenue collection. Slow invoicing and slow collections quietly raise net burn even when nothing about your spending changed. Tightening accounts receivable can extend runway without cutting anything.
- Cloud and tooling. Real money, rarely decisive. Worth doing once payroll is settled, not instead of settling payroll.
Note that two of these four extend runway without cutting spend at all. Burn is a net number, and the inbound side of it is often the more tractable half.
Does the burn buy enough growth?
Runway tells you how long you last. It does not tell you whether the spending is working. Two companies with identical burn and identical runway can be in completely different positions if one is converting that cash into revenue and the other is not. That efficiency question has its own metric, and we covered it separately: see burn multiple for how investors grade the return on your burn, and what the benchmarks actually are. For the purposes of this piece, the point is only that a burn rate can leave you plenty of runway and still be a bad burn rate, because runway measures time, not progress.
Are you default alive or default dead?
Paul Graham's framing from his 2015 essay is still the cleanest gut-check available. Assuming expenses stay flat and revenue keeps growing the way it has been, do you reach profitability on the money you have left? If yes, you are default alive. If no, you are default dead, and you are dependent on someone else's decision to survive.
The detail worth noticing is Graham's own observation that half the founders he spoke to did not know which one they were. Not that they were in trouble, that they did not know. A good burn rate, in the end, is one you have deliberately chosen with that answer in front of you. That judgement is where a fractional CFO earns their keep: modelling the trade-off between growth and survival so you decide it on purpose, rather than discover it after the fact.
So stop asking whether your burn rate is high or low in the abstract. Ask what runway it leaves, whether that runway covers the milestone you actually need to hit, and whether the numbers you are reading are current enough to bet the company on. If you cannot answer the third one, start there, with a monthly close you can trust.
This article is general information about how burn rate and runway are commonly evaluated, not financial advice for your specific situation. What counts as a healthy burn rate for your company depends on facts this piece cannot see.