Video · About 6 minutes

How to calculate burn rate, runway, and growth rate

Tim Brady · Y Combinator Free Beginner

How to calculate burn rate, runway, and growth rate

YC partner Tim Brady defines burn rate and runway plainly in a few minutes, which is the vocabulary you need to see why a profitable-looking product can still empty the bank. It separates gross burn (everything you spend) from net burn (spend minus what actually comes in), the split that explains the disconnect you are feeling. Short and founder-facing, so it is a fast reset before you re-open your model.

  • Net burn, not per-unit margin, is what drains the account: it is total monthly spend minus real cash coming in, and it can stay negative while each sale looks profitable.
  • Runway equals cash in the bank divided by net burn, so the fix-first lever is usually the fixed spend sitting in gross burn.
  • Watching burn and growth together tells you whether each dollar spent is buying enough progress, or just buying time.
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The question it answers

  1. My unit economics work on a spreadsheet but I'm bleeding cash every month. Why the disconnect and what do I fix first?

Read with it

  1. This is the clearest walk-through of the exact trap you are in: your spreadsheet shows a healthy per-unit margin because unit... Toptal Article · About a 15 minute read Don't Scale an Unprofitable Business: Why Unit Economics (Still) Matter Toby Clarence-Smith
  2. Once you accept that the spreadsheet lied about your cash, this template makes the timing gap concrete: you enter your real... The Startup Project Tool · Downloadable spreadsheet, 15 to 30 minutes to fill in Startup Runway Calculator Template (Excel and Google Sheets) The Startup Project
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