Gross Burn
The total spend rate, before revenue - useful for sizing the cost base, but net burn is what sets the runway.
- Term
- Gross Burn
- Is
- Total monthly cash outflow, before revenue
- Shows
- The size of the cost base / spend rate
- But
- Net burn sets the runway, not gross burn
Forms & parts of speech
Definition in plain terms
Gross burn is the total amount of cash a company spends each month to operate - salaries, rent, software, marketing, everything going out - before subtracting any cash it brings in. It measures the size of the cost base and the gross rate of spending.
It differs from net burn, which subtracts revenue to show the true monthly drain. A company with $600k of monthly costs has $600k gross burn regardless of revenue; if it collects $200k of cash revenue, its net burn is $400k.
When each matters
Gross burn and net burn answer different questions, and using the wrong one misleads. Gross burn is useful for understanding the cost structure and what could be cut - it is the total commitment the company has taken on, and in a downturn or cash crunch it shows the spending that can be reduced.
But net burn is the survival number: runway is cash divided by net burn, not gross burn, because revenue genuinely offsets spending.
The common mistake is judging runway off gross burn (which understates it for a revenue-generating company) or, conversely, ignoring gross burn entirely (which hides how large and reducible the cost base is).
The discipline is watching both - gross burn to understand and manage the cost base, net burn to know the true runway.
But gross burn - the total monthly spend before revenue - was what showed the company where the cuttable cost base actually was: the full set of salaries, software, rent, and marketing commitments it had taken on.
To extend runway, the company worked both: it reduced gross burn by cutting the spending it could (lowering the total outflow), which in turn reduced net burn and extended the runway that net burn sets.
It avoided the two mistakes - judging runway off gross burn (which would have overstated how long it had) and ignoring gross burn (which would have hidden where the reducible costs were).
By managing the cost base through gross burn and tracking survival through net burn, the company extended its runway deliberately rather than guessing.
and confusing the two metrics, which answer different questions - cost structure (gross) versus survival/runway (net).
Formula
Benchmarks
Gross burn has no universal target; read it for cost-base size and reducibility, and use net burn for runway.
Ranges are illustrative; every published figure is cited from a named public source or labelled “RGM analysis.”
Synonyms & antonyms
Synonyms
Antonyms
Origin & history
Gross and net burn entered standard startup-finance vocabulary as venture-backed companies tracked cash consumption against runway; gross burn measures the cost base while net burn nets out revenue to set the runway clock - both sharpened in focus by the post-2022 turn to capital efficiency.
Etymology: source.
Usage trends
Search interest for this term over the last five years:
Common questions
- What is gross burn?
- The total cash a company spends each month on operations, before subtracting any revenue — the gross spending rate, distinct from net burn.
- Gross burn vs net burn — which sets runway?
- Net burn. Runway = cash ÷ net burn, because revenue genuinely offsets spending; gross burn shows the cost base, not the true drain.
- When is gross burn useful?
- For understanding the cost structure and what could be cut — it shows the full spending commitment, which matters most in a downturn or cash crunch.
Related tools & calculators
Resources & people to follow
- referenceWikipedia — burn rate
- referenceStartup-finance practice
- referenceRGM analysis — manage the cost base with gross burn, track survival with net burn
Curated, non-competitor resources verified per term.
Related training
Disciplines
Areas of marketing where gross burn is a core concern: