How do you calculate burn rate?

Net burn = cash out minus cash in per month, averaged over 3-6 months. Gross burn is total outflows. Use bank cash, not P&L, and exclude one-time financings from run-rate.

How do you calculate runway?

Cash on hand divided by net burn. 18+ months is comfortable, 12 months triggers planning, under 6 months is fundraise or cut now.

Cash or accrual for burn?

Cash for runway decisions, accrual for unit economics. Reconcile both — deferred revenue and AP timing distort P&L burn.

When should we raise?

Start at 12 months cash, target close by 6 months. Raising under 6 months weakens leverage and forces bridge terms.

Burn Rate and Runway in 2026: Gross vs Net Burn With Forecast Template

Formula and Traps

Net burn = (starting cash − ending cash) / months, adjusted for financings. Exclude fundraising inflows from run-rate.

Pair with Series A, Venture Debt, Debt vs Equity, and Cash-Flow.

Forecast Template (13-Week + 12-Month)

Weekly cash: collections — see Collections — payroll, AP, debt service.
Monthly P&L to cash bridge: deferred, prepaids, capex — see CapEx.
Hiring plan tied to payroll run-rate — see Payroll and Controller Hiring.

Link to FP&A Software and Month-End Close for actuals.

Levers When Runway Shortens

Lever	Speed	Trade-off
Freeze hiring	Immediate	Slows roadmap
Cut contractors/tools	Weeks	Capacity loss
Extend payables (not payroll/tax)	Weeks	Vendor strain
Accelerate collections	Weeks	Discount cost
Bridge / venture debt	Month	Covenants — see Debt

Report burn, runway, and zero-cash date to board monthly — see Board.

Worked Example: $2.1m Cash, $180k Net Burn

Month	Starting cash	Net burn	Runway remaining
Jan	$2,100,000	$180,000	11.7 months
+$300k ARR closes in March	—	drops to $140,000	15+ months
Miss plan, burn rises to $220,000	—	$220,000	9.5 → fundraise now

The same $2.1m is 15 months or 9 months depending on the next quarter. That is why single-point runway (“we have 12 months”) misleads — report it as a range with triggers: above 12 months execute plan, 9–12 months start fundraise prep, under 6 months cut plus bridge in parallel. Pin the zero-cash date on the board deck every month — see Board — because “runway” without a date doesn’t change behavior.

Gross vs Net: The Distortion Guide

Gross burn ($320k/mo outflows) vs net burn ($180k/mo after $140k collections) tell different stories. Watch the wedges:

Deferred revenue surge. Big annual prepayments crater net burn temporarily — strip them out for run-rate or the “improvement” reverses next quarter. Reconcile to ASC 606 deferred schedules.
AP timing games. Stretching payables flatters net burn and strains vendors — see AP Fraud controls so the lever stays legitimate.
One-time inflows. Tax refunds, deposits, asset sales — exclude from run-rate, disclose separately.
Founder loans. Cash in that isn’t revenue or equity masks burn and complicates Related Party testing.

Report all three lines monthly: gross outflows, collections, net burn — with the bridge items labeled. A board that only sees net burn can’t judge efficiency; a board that only sees gross can’t judge survival.

Hiring Plan: The Burn Driver

Headcount is 60–80% of burn for most startups. Tie every req to cash: loaded cost × start date + 45-day payroll lag, summed into the forecast — see Payroll and Controller Hiring. Common failure: six approved reqs with no start-date staggering add $90k/month overnight while revenue ramps linearly. Stage starts quarterly, gate each cohort on the prior cohort’s revenue milestone, and keep a freeze list (roles cut first if burn exceeds plan two months running). Review against Going Concern thresholds when runway drops under 12 months.