Gross Burn Rate

Gross burn rate is the amount of cash spent in a period before accounting for cash generated by customers. It shows the size of the cost base the business must support, regardless of whether net cash flow is positive or negative.

Example

A month includes $50,000 payroll, $12,000 cloud and software payments, $8,000 marketing, and $5,000 other operating payments. Gross burn is $75,000. If customers provide $70,000 of cash, net burn is only $5,000.

How to use it

Use gross burn to assess fixed commitments and spending flexibility. In this example, a small net deficit depends on continued collections covering almost all costs. Examining gross burn helps explain what happens if a large annual payment arrives late or revenue declines.

The measure depends on its scope: some reports include only operating outflows, while others include additional spending. Noncash stock compensation and depreciation do not directly consume cash. Lumpy payments can distort one month, so use both the transaction-level forecast and a representative historical average.

Further reading: Stripe on Gross Burn Rate.

Related: Net burn rate, Cash runway.