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Key financial indicators: burn rate and runway

Short answer

Gross burn equals total monthly expenses Rs 13,00,000; net burn is expenses minus revenue, Rs 9,00,000/month; runway is cash divided by net burn, about 13.3 months.

Explain the key financial indicators a startup should track. A startup has Rs 1.2 crore cash in the bank. Monthly revenue is Rs 4,00,000 and monthly expenses are Rs 13,00,000. Calculate the gross burn rate, net burn rate and runway. What can the founder do if the runway is too short?

Key indicators

IndicatorMeaning
Revenue growth (MRR/ARR)Monthly or annual recurring revenue and its growth
Gross margin(Revenue - direct cost) / revenue
Burn rateCash spent per month in excess of income
RunwayMonths the cash will last
CAC and LTVCost to win a customer; value from that customer
ChurnShare of customers lost per period
Break-even pointSales at which profit is zero
Cash conversion / working capitalSpeed of turning sales into cash

Numerical

Cash = Rs 1.2 crore = Rs 1,20,00,000.

Gross burn rate = total monthly expenses = Rs 13,00,000.

Net burn rate = expenses - revenue:

13,00,000−4,00,000=Rs 9,00,000 per month13{,}00{,}000 - 4{,}00{,}000 = \text{Rs } 9{,}00{,}000\ \text{per month}

Runway:

Runway=CashNet burn=1,20,00,0009,00,000=13.3 months\text{Runway} = \frac{\text{Cash}}{\text{Net burn}} = \frac{1{,}20{,}00{,}000}{9{,}00{,}000} = 13.3\ \text{months}

Actions if runway is short

  • Cut non-essential spending; delay hiring.
  • Raise sales or prices; collect receivables faster.
  • Raise new funds early (rounds take 3-6 months), or take bridge finance.
  • Pivot to a cheaper model.

Answer: Gross burn = Rs 13,00,000/month; net burn = Rs 9,00,000/month; runway is about 13.3 months.

✓ Answer checked by Claude Opus 5.5 (high effort)

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