The burn rate is calculated by dividing the total account balance by a business’ daily expenses (an average from at least the past 30 days). Generally, the burn rate is measured by assessing how much money a company is spending per month in comparison to the positive cash flow it generates. This is a crucial metric in determining your company’s trends towards success. In the beginning, it is common for a business’ burn rate to be high while it spends money on initial costs, in the hopes that once they are up and running, costs will even out and the rate will lower.
Depending on the industry of your business and other factors (cost of entry, stock, overhead..etc.), the amount of time it takes to develop a positive burn rate can differ.
