How to Calculate Monthly Burn Rate in 3 Steps

If you have ever Googled "how to calculate monthly burn rate" and come back with a 2,000-word article that never actually told you the steps — this guide is the antidote. Three steps. Worked example. Done.

Step 1: Find Your Monthly Expenses

Open your business bank account or accounting software. Look at the most recent complete month and add up everything that left the account. That sum is your gross monthly expenses.

If you want to be more accurate, average the last 3 months. Some months are unusually high (annual prepayments, big legal fees) and some are unusually low. A 3-month average smooths those out.

Quick gut check: a 5-person bootstrapped SaaS usually runs $25,000-$60,000 per month. A 10-person funded startup usually runs $80,000-$180,000. If your number is wildly different, double-check it.

Step 2: Find Your Monthly Revenue

Same idea, opposite direction. Look at every dollar that came into the account from customers in the last complete month. Add it up. That is your monthly revenue.

Important: count only payments from customers, not investor wires, founder loans, grants, or refunds you received. Those are not recurring business revenue.

Again, a 3-month average is more reliable than a single month, especially if you have variable revenue from one-time deals.

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Step 3: Subtract Revenue From Expenses

Gross burn rate = Monthly expenses (from Step 1)

Net burn rate = Monthly expenses - Monthly revenue (Step 1 minus Step 2)

That is it. You are done. Your gross burn is the bigger number; your net burn is the smaller number. Most people mean "net burn" when they say "burn rate."

Worked Example

A 4-person SaaS startup pulls up their March bank account.

Step 1: Total outflows for March = $52,000 (salaries $42K, software $3K, marketing $4K, office $2K, misc $1K). Gross burn = $52,000.

Step 2: Total inflows from customers in March = $11,000.

Step 3: Net burn = $52,000 - $11,000 = $41,000 per month.

To get runway, divide cash by net burn. If they have $300,000 in the bank, runway = $300,000 / $41,000 ≈ 7.3 months.

The Easier Way

If you want to skip the manual math, plug your numbers into free burn rate calculator. It does steps 1-3 plus calculates runway and the exact zero date in 30 seconds. Same answer, no spreadsheet.

Frequently Asked Questions

Should I use cash basis or accrual basis numbers?

For burn rate, use cash basis — what actually moved through your bank account. Accrual accounting includes revenue you have invoiced but not collected and expenses you have committed to but not paid, which distorts the real cash trajectory.

Do I include estimated taxes?

If you make quarterly estimated tax payments, yes — those are real cash leaving your business. Spread the quarterly payment across 3 months to get the monthly equivalent and add it to expenses.

What if my expenses vary a lot month to month?

Use a trailing 3-month or 6-month average instead of a single month. This gives you a more reliable trend. If your business is highly seasonal, use a trailing 12-month average divided by 12.