Definition · also called gross burn, net burn, cash burn
Burn rate is the speed at which a company spends its cash, measured per month.
- Gross burn is everything you spend in a month: salaries, contractors, hosting, tools, ads.
- Net burn is gross burn minus revenue: how much your bank balance actually falls each month.
Net burn divided into your cash gives your runway. Once revenue exceeds costs, net burn is zero and you are profitable.
Burn rate formula
Net burn = (cash at start of period − cash at end of period) ÷ months
- Gross burn = total monthly operating expenses.
- Net burn = gross burn − monthly revenue.
- Average over three months; a single month with an annual bill or a big launch is misleading.
Worked example
Monthly costs: $2,000 contractor, $400 hosting and AI APIs, $300 tools, $3,000 founder salary = $5,700 gross burn. Revenue: $3,200 MRR.
- Net burn = $5,700 − $3,200 = $2,500/month
- With $30,000 in the bank: runway = 12 months
Cutting the founder salary to $2,000 or adding $1,000 MRR each changes runway by several months.
Burn rate for bootstrappers
Venture-backed startups burn on purpose, using investor cash to grow faster than revenue allows. Bootstrapped makers usually do the opposite: keep business burn close to zero (cheap hosting, no hires, tools paid for by revenue) so that the only real burn is personal living costs.
- Count your own living costs if you've quit your job; that is the burn that ends indie careers.
- Watch variable costs. AI-API and usage-priced infrastructure grow with users; a viral free tier can multiply burn overnight.
- Reach [default alive](/glossary/default-alive/) before adding fixed costs like hires.
Burn rate in practice: how indie makers use it
How makers in the directory managed burn:
Runs his portfolio, about $219K a month in 2026, on a deliberately simple stack of PHP, jQuery and SQLite on a single server, with no employees: a business with almost no burn. (sources: levels.io, x.com)
Quit his job in mid-2025 and flew to Brazil, living on savings while going all in on SuperX; Indie Hackers reported $1K MRR on day one and about $23K MRR within six months. (source: indiehackers.com)
Returned to Nigeria with more than $20,000 in savings to run Selar full time, where living costs made that savings last. (source: techcabal.com)
After losing about half of Publer's paying customers in 2018, the team worked back to breakeven in August 2021, ending net burn without raising money. (source: publer.com)
Frequently asked questions
What is burn rate?
The amount of cash a company spends per month. Gross burn is total monthly spending; net burn is spending minus revenue.
How do you calculate burn rate?
Subtract your cash balance at the end of a period from the balance at the start and divide by the number of months. Averaging over three months smooths out one-off bills.
What is the difference between burn rate and runway?
Burn rate is how fast cash goes out each month; runway is how many months your cash lasts at that rate (cash ÷ net burn).
What is a good burn rate?
There is no universal number. For a bootstrapped business, the goal is net burn at or near zero; for a funded startup, burn should leave at least 12–18 months of runway.
Related terms
Keep reading
Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.