{
  "version": "1.3.0",
  "releasedAt": "2026-05-20",
  "kpi": {
    "rogueId": "finance.net_burn_rate",
    "slug": "net_burn_rate",
    "domain": "finance",
    "defaultLabel": "Net Burn Rate",
    "description": "Average monthly net cash outflow over the reporting period — total cash spent minus total cash collected, divided by the number of months in the period. The headline survival number for venture-backed startups: it pairs with `finance.total_cash_in_bank` to produce runway, and pairs with revenue growth to produce the Bessemer \"burn multiple\". Common pitfall: net burn is volatile — large quarterly bills (annual SaaS renewals, employer-tax true-ups), enterprise prepayments, and FX swings can mask the underlying trend. Smoothing over a trailing 3-month average is standard board practice. Equally important: do not silently include one-off cash events (acquisitions, settlements, large prepayments received) without flagging them — boards prefer a \"core burn\" and \"headline burn\" pair when the period is noisy.",
    "fieldType": "currency",
    "unit": "/month",
    "maturity": "general",
    "suggestedForStages": [
      "preSeed",
      "seed",
      "seriesA",
      "seriesB"
    ],
    "defaultOwningFunctions": [
      "Finance"
    ],
    "stageRelevance": {
      "preSeed": "core",
      "seed": "core",
      "seriesA": "core",
      "seriesB": "recommended"
    },
    "definitionSource": {
      "tier": "editorial",
      "sourceName": "imboard Editorial",
      "sourceUrl": null,
      "sectionRef": null,
      "publicationDate": "2026-04-01",
      "attributionNotice": null
    },
    "formula": "net_burn_rate = (total_operational_outflow − total_operational_inflow) / months_in_period. Most boards average over a trailing 3 months to dampen lumpy items; flag the methodology explicitly. When net burn is negative, the company is net-cash-generative for the period.",
    "whyItMatters": "Single most-watched metric below revenue at venture-backed companies — drives runway, valuation reads (via the burn multiple), and the calculus on when to fundraise vs. cut.",
    "interpretationGuidance": "Compare against the company's own forecast first (`finance.burn_rate_scenarios`); deviation > ±15–20% from the most-likely scenario typically warrants a board note (industry folk-wisdom, not citation-grade). Stage-level industry context: per the SaaS Capital 2025 Spending Benchmarks for Private B2B SaaS Companies, total median spend runs ~95% of ARR for bootstrapped and ~107% of ARR for equity-backed private SaaS, with 55% of equity-backed companies operating at a loss. For burn-multiple framing (net burn ÷ net new ARR), Series A medians sit near 1.2x and growth-stage companies above $25M ARR target ~1.4x with best performers below 1.0x (per cited 2025 industry analyses; pull the live edition to confirm).",
    "relatedKpiIds": [
      "finance.gross_burn_rate",
      "finance.runway_months",
      "finance.total_cash_in_bank",
      "finance.burn_rate_actual",
      "finance.burn_rate_scenarios",
      "finance.total_operational_inflow",
      "finance.total_operational_outflow",
      "sales.arr"
    ],
    "calculationPolicy": {
      "inclusionRules": [
        "Total cash outflow from operations over the period: payroll + benefits, infrastructure, GTM spend (S&M programs + tooling), COGS, G&A, professional fees, software, taxes.",
        "Subtract total cash inflow from operations: invoiced revenue collected, customer prepayments received, refunds received.",
        "Divide the net by the number of months in the period to produce a monthly rate.",
        "Standard board practice is a trailing-3-month average to dampen single-month lumpiness — state the smoothing window explicitly in any output."
      ],
      "exclusionRules": [
        "Financing activities: equity raises, venture debt drawdowns, debt repayments. Burn is an operating metric.",
        "Acquisitions, divestitures, and other M&A cash movements. Flag as one-off, do not net into burn.",
        "Pure FX revaluation gains/losses on cash balances (when material).",
        "Stock-based compensation expense — it is not cash."
      ],
      "requiredInputs": [
        "Period-by-period total operational outflow (`finance.total_operational_outflow`).",
        "Period-by-period total operational inflow (`finance.total_operational_inflow`).",
        "Period length and smoothing window (e.g. trailing-3-month).",
        "Flagged list of known one-off items in the period (large enterprise prepayments received, annual SaaS bills paid, true-ups)."
      ],
      "dataSourcePriority": [
        "Cash-basis P&L for the period (closes faster than accrual; better matches \"burn\").",
        "Accrual P&L with a working-capital reconciliation as a fallback — net out non-cash items explicitly."
      ],
      "edgeCases": [
        "Cash-flow-positive periods: net burn goes negative. Present as \"net cash generation\" rather than \"negative burn\" to avoid misreading.",
        "Annual SaaS prepayment from a large customer hits in one month: spike the inflow that month and net burn looks artificially good. Boards prefer a \"core burn excluding one-offs\" companion line.",
        "Employer-tax true-ups (typically Jan/Apr in the US): a single-month outflow up to 30-50% above run-rate. Note the calendar effect in commentary.",
        "FX swings on a foreign payroll: significant when the period spans currency volatility — break out the FX impact when material."
      ],
      "validationChecks": [
        "Net burn ≤ gross burn always. If net > gross, the inflow definition is wrong (likely double-counting or including financing inflows).",
        "Sum of monthly net-burn numbers should reconcile to period-net-burn × months within 1-2%. Larger drift means smoothing is being misapplied.",
        "Net burn ÷ ARR (burn multiple) should sit within stage-typical bands — out-of-band burn multiple is more often a calculation error than a real outlier."
      ],
      "commonMiscomputations": [
        "Using accrual-basis operating expenses without removing non-cash items (D&A, SBC, accrued-but-unpaid expense) — overstates burn.",
        "Netting in equity raise proceeds or venture debt — turns a fundraising month into \"negative burn\" and lies about run-rate spend.",
        "Spot-month burn instead of a trailing average — a single noisy month becomes the headline number and runway swings wildly.",
        "Silently including one-off prepayments or M&A consideration — boards want \"core\" and \"headline\" separated; collapsing them hides the trend.",
        "Counting refunds issued as part of the outflow but not refunds received in the inflow (or vice versa) — sign-mismatch errors are surprisingly common when refunds are large."
      ]
    },
    "metricBasis": {
      "timeBasis": "period_flow",
      "moneyBasis": "cash",
      "production": "computed"
    }
  }
}