Net burn is monthly cash consumption after revenue and operating inflows — the burn rate number that actually drives how long your cash lasts.

How it works

Track cash movement, not just P&L. Example: $450K monthly operating expenses, $120K customer collections, $30K other income — net burn ≈ $300K. With $1.8M in the bank, runway is roughly six months if nothing changes.

Net burn differs from gross burn, which ignores revenue and shows total operating spend. Early-stage companies with minimal revenue often report both; growth-stage boards focus on net burn as sales offset costs.

Seasonality matters: annual prepayments can make one month look cash-positive while normalized net burn stays negative. Use trailing three- or six-month averages for planning and investor updates.

Capital expenditures, debt principal, and financing inflows are usually excluded from operating net burn but should be modeled separately in a full cash forecast. Boards often ask for both operating net burn and all-in cash change in the same update.

Why it matters

• Founders: Start investor conversations before net burn compresses runway below your realistic close timeline — often five to seven months of buffer.
• Investors: Net burn relative to ARR growth feeds metrics like burn multiple. Efficient growth shows declining net burn as a percent of new ARR; inefficient growth shows the opposite.

Common mistake

Using accrual revenue or bookings instead of cash collected. A signed annual contract does not reduce net burn until payment hits the bank on your billing terms.

Related ideas

See also burn rate, gross burn, runway, and cash balance.