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Business Terms
Burn Rate
Definition
The rate at which a company spends money, especially cash reserves, typically measured monthly.
Overview
Burn rate shows how fast you're using cash. It's critical for startups and growing businesses to ensure they don't run out of money before becoming profitable.
Example
A startup with $100,000 in the bank and $20,000 monthly expenses has a $20,000 burn rate.
Best Practices
Monitor monthly, manage expenses, and ensure sufficient runway.
Common Mistakes to Avoid
Not tracking burn
Underestimating expenses
Running out of runway
Frequently Asked Questions
How do I reduce burn rate?
Cut non-essential expenses, negotiate better terms, and improve operational efficiency.