Burn Rate and Runway: Numbers Every Founder Should Know Cold
Gross burn, net burn, and cash runway — how to calculate them, which costs founders forget, and the month you should start raising.
You have $500,000 in the bank. You spend $70,000 a month and collect $20,000. That is ten months of runway, and if today is September the money is gone by July. Most founders can recite the first two numbers and go quiet on the third — which is the one that decides when you start a raise, whether you make the hire, and how the next board call goes. The Burn Rate Calculator does the arithmetic in the browser, but the arithmetic was never the hard part.
Gross burn and net burn are different questions
Gross burn is everything leaving the account in a month: $70,000 in the example. Net burn subtracts what comes in: $50,000. Investors ask for net burn because it tracks how fast the balance actually drops. Gross burn answers a different question — how much you would have to cut to survive a quarter where revenue does not show up. Both are worth knowing, and they only converge at zero revenue.
Runway, at flat numbers, is just cash ÷ net burn. The trouble starts the moment anything grows.
The four lines that make runway look better than it is
Every optimistic runway number I have seen came from the same handful of omissions:
- Taxes you collected but have not remitted. VAT sitting in your account is not your money. It leaves on a schedule someone else set.
- Annual bills paid upfront. That insurance renewal or the yearly cloud commit lands in one month and wrecks it.
- Gross payroll, not net. Employer taxes and benefits are cash out too, and in some countries they add 30% on top of the salary line.
- Loan principal. It sits below the line on your P&L and above the line in your bank account.
Add those back and the ten months are often eight and a half. Better to find that out in a calculator than in a Tuesday-morning bank notification.
Default alive or default dead
Paul Graham’s framing from 2015 is still the sharpest version of this question: at your current growth and spending, do you reach profitability before the money runs out? If yes, you are default alive. If no, you are default dead, and the honest answers are all uncomfortable — raise, grow faster, or spend less.
The reason it matters more than the runway number alone is timing. A company with eight months of runway that is default alive is in a much better conversation with investors than one with fourteen months that is not. The calculator checks this for you: enter month-over-month growth for revenue and for costs, and it tells you whether the two lines cross before the balance hits zero.
Worth being honest about the growth input, though. A plan that assumes 15% monthly revenue growth for three straight years is not a plan, it is a wish. Try your number, then try half of it.
When runway stops being one number
Straight-line projections break as soon as your plan has actual events in it. Two engineers start in March. Pricing changes in Q3. Churn drifts from 3% to 4% and quietly takes a month of runway with it. At that point you are either maintaining a spreadsheet with a tab per scenario, or you move to something built for it — Adlega turns those assumptions into a connected 36-month model where MRR, hiring, costs and runway all recalculate when one input changes, in the format investors expect to see.
Until then, the single number still does real work. Open the Burn Rate Calculator, put in today’s balance, and find out what month you are actually planning for.