Burn Rate
Understanding Burn Rate
Burn rate is a measure of how quickly a company is using up its cash reserves, often calculated on a monthly basis. It reflects the rate of negative cash flow and is a critical metric for startups, as it indicates how long the company can continue operating before it needs additional funding or becomes profitable.
Managing Burn Rate
- Monitoring Expenses: Keeping a close watch on operating costs helps control burn rate and prolong runway.
- Fundraising Timing: Understanding the burn rate allows startups to plan for fundraising before running out of cash.
- Optimizing Growth Strategies: Startups can adjust their growth strategies to balance spending with revenue generation.