Burn rate is the speed at which your company spends cash, usually measured per month. Net burn subtracts the cash you take in from the cash you pay out. Gross burn counts only what goes out. Investors and lenders ask for net burn, because it is the figure that sets your runway.
An example. A startup with 40,000 euros leaving and 15,000 arriving burns 25,000 euros net each month.
You track burn rate monthly because it tells you how fast your cash cushion shrinks. Take your bank balance at the start of the month and at the end. The difference is your net burn. Do this for three months and use the average, because single months are distorted by annual payments such as insurance or a tax bill.
Here is a worked example. In March you pay 12,000 euros in salaries, 3,000 euros rent, 6,000 euros for ads and 4,000 euros to suppliers. That is 25,000 euros gross burn. You collect 9,000 euros from customers. Net burn is 16,000 euros. If January and February looked similar, plan with roughly 16,000 euros per month.
Two mistakes come up again and again. The first is confusing burn rate with the loss in your profit statement. They are different numbers. A customer who owes you 10,000 euros counts as revenue in the profit statement but does not reduce your burn until the money lands in the account.
The second is treating burn as fixed. Burn moves with your decisions. One new hire at 3,500 euros gross costs the company roughly 4,400 euros per month once employer contributions are added, and your burn rises by that amount from day one.
Some founders report only gross burn to look disciplined, then forget that a large annual payment is coming. List the annual and quarterly payments separately and spread them over twelve months, so your burn number does not mislead you.
