👉 Burn math, or burn rate, is a crucial metric in startup finance that quantifies how quickly a company spends its cash reserves to generate revenue. It's calculated by dividing the total remaining cash on hand by the number of days in the forecast period, usually a month. This metric helps entrepreneurs understand their financial health and runway, indicating how long they can operate before needing additional funding. A high burn rate suggests rapid spending and potential pressure to scale quickly, while a low burn rate implies more sustainable cash usage. Effective management of burn math is essential for startups to balance growth ambitions with financial prudence, ensuring they can achieve profitability or secure further investment.
