Burn rate is the speed at which a business spends its cash, usually measured per month. Gross burn is total monthly cash outgoings; net burn is outgoings minus cash receipts. Burn rate is a key metric for loss-making start-ups and scale-ups because it determines cash runway and how soon more funding is needed.
What it means
Gross burn shows the cost base the business is carrying. Net burn shows how much cash is actually being consumed after revenue. A company spending £250,000 a month while collecting £150,000 has a gross burn of £250,000 and a net burn of £100,000.
How it works in a UK business
Investors look at burn alongside growth. Burn that buys fast, efficient revenue growth is easier to justify than burn that does not. Some investors use a burn multiple, net burn divided by net new annual recurring revenue, to judge efficiency.
Burn should be measured on a cash basis, not from the profit and loss account, because timing differences such as annual software payments, VAT and R&D tax credits can make the two diverge.
Frequently asked questions
What is a good burn rate?
There is no universal figure. A good burn rate is one the business can fund until it reaches its next milestone, whether that is profitability or the next funding round, with a safety margin. It should also be proportionate to the growth it produces, which is why investors compare burn with revenue growth.
How can a business reduce its burn rate?
Typical steps include pausing non-essential hiring, renegotiating large supplier contracts, cutting underused software, improving collections and focusing sales on faster-closing deals. Changes should be modelled first so leaders understand the effect on both runway and growth before committing.
Last updated: 5 November 2026