Net burn rate is the rate at which your business loses money each month, based on your monthly revenue, your monthly operating expenses, and the cash you started with to run your business. Use this formula to calculate net burn rate:
Net Burn Rate (%) = (Revenue - Monthly Operating Expenses) / Starting Cash Available * 100
Net burn rate can help you measure how much your business profits each month versus how much your business spends each month to keep the lights on, compared to your starting investment.
Here’s an example: If your business earns $1,000 in revenue per month, you spend $2,000 a month running your business, and spent $20,000 to start running your business, you would have a net burn rate of 5%. This means that, after revenue, you’re burning through 5% of your starting investment to run your business.