How do you calculate burn rate, runway and growth rate?

Burn rate is the cash going out each month minus the cash coming in. Brady stresses that it tracks cash flow, not expenses or revenue on paper: a customer who pays next year does not improve this month’s burn rate.

Divide the cash in your bank account by your monthly burn rate to estimate how many months you have before running out. For example, $200 in cash and a $10 monthly burn rate gives 20 months of runway. When cash inflows or expenses vary, forecast them month by month, and review these metrics weekly.

Growth rate measures how quickly sales are increasing. Divide this month’s revenue by last month’s, subtract one, and express the result as a percentage; $150 after $100 is 50% growth. Over longer periods, use compounded monthly growth: revenue rising from $100 to $600 in six months is about 35% per month, not 100%.

For seasonal businesses, Brady says quarterly or annual growth may fit better than monthly growth, provided the calculation period is clear to investors. Subscription payments are recurring revenue, while one-off widget sales are non-recurring. Use MRR, or monthly recurring revenue, only when the revenue is recurring; investors value it for its predictability.