Net Burn Rate
The rate at which a company consumes cash after accounting for revenue generated.
Definition
Net Burn Rate measures how much cash a company is losing each month after factoring in revenue. It provides a more accurate picture of cash consumption than gross burn rate because it accounts for the money coming into the business.
How to Calculate
Formula:
Net Burn Rate = Monthly Revenue - Monthly Expenses
or
Net Burn Rate = Gross Burn Rate - Monthly Revenue
Note: A negative net burn rate means the company is profitable and generating more revenue than it's spending.
Real-World Example
SaaS Startup:
- • Monthly Revenue: $50,000
- • Monthly Expenses: $80,000
- • Net Burn Rate: $50,000 - $80,000 = $30,000
The company is burning $30,000 net cash per month.