Burn Rate - Financial Breathing Measure of a Startup

Let's say a company has $100,000 in its bank account. Every month, it has a net burn of $20,000.
In this case, the company's runway is calculated as follows:
$100,000 ÷ $20,000 = 5 months
That is, the company can operate for 5 months with the available funds.

If the Burn Rate is excessive or rapidly increasing, it is advisable for the company to take the following measures:
Optimize the cost structure (for example, eliminating unnecessary services or locations)
Increase revenue streams (acquiring new customers, introducing additional services)
Develop a strategy for strict expense control
Initiate investment attraction negotiations early

Gross Burn Rate
This indicates the total operational expenses that a company incurs each month. These include:
- Salaries
- Rent payments
- Company's service and infrastructure costs
- Digital services, software licenses, and others
Net Burn Rate
This shows how much net funds the company is losing each month after accounting for revenues. That is:
Net Burn = Expenses - Revenues

Burn rate is a crucial financial indicator that shows how quickly a company is spending its available cash before it starts generating profit. It plays a key role in determining the financial stability of a startup and calculating how long it can operate with the available funds (i.e., runway).