Burn rate explained for UK companies

Gross burn vs net burn

Gross burn is your total monthly cash spend — every payment leaving the account. Net burn is that figure minus the cash coming in. Net burn is the one that matters for survival, because it is what actually shrinks your balance. A business with £50k of costs and £40k of receipts has a net burn of £10k a month, whatever its headline turnover.

Why it's a cash number, not a profit number

Burn is measured in cash, not accounting profit, and the two differ. Depreciation reduces profit but burns no cash; buying stock burns cash but is not an expense until sold; a tax bill burns a quarter's cash in one hit. This is why a business can report a small loss yet burn cash fast, or trade profitably yet still burn during a growth push. See profit versus cash flow.

Reducing burn without breaking the business

The instinct under pressure is to cut everything, but indiscriminate cuts can kill the revenue that would have saved you. Better to separate spend that drives income from spend that does not, protect the former, and trim the latter hard. Renegotiating supplier terms, pausing discretionary projects, and tightening headcount plans usually move the number more safely than slashing sales and marketing.

Burn and runway together

Burn is only half the picture — it becomes meaningful when divided into your cash to give runway. Cutting burn from £15k to £10k on a £90k balance stretches runway from six months to nine, buying three months to fix the underlying issue. That is why controlling burn is the fastest lever most stressed businesses have.

When finance bridges the burn

If the burn is temporary — a growth investment, a seasonal trough — finance can carry you to the other side.

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