How fast a business spends its cash reserves, usually measured per month — a key figure when income is uneven or you are running at a loss.
Burn rate is how fast your business spends its cash reserves, usually measured per month. If your fixed costs plus your owner’s draw come to $6,000 a month, that’s roughly your burn rate — what leaves the account in a typical month regardless of what comes in.
For sellers, knowing your burn rate is what turns a lean month from a panic into a plan. It tells you how much of a buffer you actually need and how long a dry spell you can survive. Freelancers with seasonal or lumpy income especially need this number. For buyers, this is purely internal to the professional.
Burn rate pairs with runway — reserves divided by burn tells you how many months you can last without new income. The useful version separates fixed burn (rent, software, insurance you’ll owe no matter what) from variable spending you could cut in a crunch. Knowing both is the difference between “I need work eventually” and “I have four months, and here’s my floor.” An emergency fund is how you extend it.