1. What is Burn Rate Percentage?

Burn Rate Percentage is a financial metric that shows what percentage of a company's total cash is being spent per period (typically monthly). It helps businesses understand their cash consumption rate relative to their available funds.

2. How Does the Calculator Work?

The calculator uses the Burn Rate Percentage formula:

Where:

• \( \text{Burn Rate} \) — Monthly cash expenditure ($/month)
• \( \text{Total Cash} \) — Total available cash reserves ($)
• \( \text{Burn Rate %} \) — Percentage of cash burned per month

Explanation: This calculation shows how quickly a company is using its cash reserves, expressed as a percentage of total cash per period.

3. Importance of Burn Rate Calculation

Details: Monitoring burn rate percentage is crucial for startups and businesses to manage cash flow, determine runway (how long until funds run out), and make informed decisions about fundraising or cost-cutting measures.

4. Using the Calculator

Tips: Enter monthly burn rate in dollars per month and total available cash in dollars. Both values must be positive numbers greater than zero for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good burn rate percentage?
A: This varies by industry and business stage, but generally a lower percentage indicates longer runway. Companies should aim for a burn rate that aligns with their growth strategy and funding availability.

Q2: How does burn rate percentage differ from gross burn rate?
A: Gross burn rate is the total cash spent per month, while burn rate percentage shows this amount as a percentage of total cash reserves, providing better context for cash management.

Q3: When should companies be concerned about their burn rate percentage?
A: When the percentage indicates less than 6-12 months of runway remaining, or when it's significantly higher than industry benchmarks for similar stage companies.

Q4: Can burn rate percentage be negative?
A: No, burn rate percentage is always positive as it represents cash expenditure. A negative cash flow situation would be represented by positive revenue exceeding expenses.

Q5: How often should burn rate percentage be calculated?
A: Monthly calculation is recommended for active monitoring, with quarterly deep dives to assess trends and make strategic adjustments.