---
title: "Can You Calculate Your Burn Rate and Runway?"
section: "Operational Excellence"
sectionId: "operational-excellence"
date: "2026-05"
---

## Burn Rate

Your burn rate is how much cash your company consumes each month. To calculate it, you first need to know your revenue.

**Formula:** Revenue − Spend = Burn

If you are not generating any revenue, your burn is simply whatever you spent last month. Most startups are not profitable — that is normal. It takes investment to grow a business. In startups we call it "burn" to frame the urgency, but in reality burning cash just means you are losing money.

If your burn varies significantly month to month, take a three-month average for a more reliable figure.

## Burn Multiple

VCs sometimes use the **Burn Multiple** to assess product-market fit and capital efficiency. It measures how much a startup burns in order to generate each incremental dollar of ARR.

**Formula:** Net Burn ÷ Net New ARR

David Sacks and Craft Ventures use the following rule of thumb:

| Burn Multiple | Efficiency |
|---|---|
| Under 1x | Amazing |
| 1 – 1.5x | Great |
| 1.5 – 2x | Good |
| 2 – 3x | Suspect |
| Over 3x | Bad |

A low burn multiple signals that you are generating growth efficiently. A high burn multiple suggests you are spending too much to acquire each new dollar of revenue.

## Runway

Runway is how many months you can continue operating before you run out of money at your current rate of spend.

**Formula:** Cash in Bank ÷ Monthly Burn = Runway (months)

If you are profitable, your runway is infinite.

### Key benchmarks

- **18 months** of runway after fundraising is the recommended minimum
- **6 months** should be reserved for your next fundraising process — it takes longer than founders expect

### Why tracking runway matters

Keeping a close eye on runway forces spending discipline. If you can measure it, you can manage it. Founders who ignore runway tend to find themselves in a crisis with no time to fix it.