What is burn rate?

Why it matters even for a profitable business

Burn rate is usually discussed as a startup metric, but it applies just as directly to any small business going through a slow patch, a big one-off cost, or a seasonal dip in revenue: net burn tells you the rate at which cash is leaving, independent of whether the P&L technically shows a profit or a loss that month. A business can be profitable on an accruals basis and still be burning cash if customers are paying slowly enough.

Turning it into a number you can act on

Burn rate on its own is only half the answer. Divide your current cash balance by your net burn rate and you get your cash runway, the number of months you can keep operating at the current rate before the account hits zero. A £60,000 balance against a £15,000 net burn is four months of runway, which is the number that actually tells you whether you need to act now or have time to plan.

How CFO Pal helps

CFO Pal's cashflow forecast projects your cash position from your real revenue and expenses, so your effective burn rate and runway are visible automatically rather than rebuilt in a spreadsheet every time you need to check. Try the standalone cash runway calculator for a one-off estimate without connecting your accounts.