Monthly burn rate

The monthly burn rate shows how much money is needed each month to operate the business until it starts generating profit. Investors use this indicator to measure how long the amount to be invested ensures the operating time of a start-up business.

The monthly burn rate indicator is used for investors to find out when the business in which they have invested becomes cash-positive, i.e. when it brings in more money than it takes in. If the word pointer comes up during a conversation, it is worth asking back what sense the person who said it meant, because it is used quite superficially in two different approaches. 

Monthly burn rate is sometimes understood as how much money a business spends per month. Exclusively in this sense about cash-flow, i.e. cash flow, in other words, all monthly expenses, so for example the existing assets amortisation it is not usually included in this. It is clear that in this sense the monthly burn rate can only be modified by cutting expenses. 

It differs somewhat from this startup in the world, a netted interpretation is much more common, when we are not talking about expenses alone, but about expenses adjusted by income. This shows how much money the company "burns" from investors during its operation from capital, and ultimately also how long it can operate under unchanged conditions without further investment. They are used to this net also referred to as burn rate.

Fortunately, the net burn rate shows a decreasing trend, since as the company gets past the development stage, solves mass production or service provision and starts selling in larger and larger batches, its revenues increase. At the same time, the coverage rate behind your expenses improves, i.e. a smaller and smaller part of your money comes from liabilities from investors, and the proportion of your own income is increasing.