Burn rate is how much money a startup spends in a month.
Gross burn is all of the month’s spending; net burn is spending minus cash received from customers.
Runway is how many months the money will last: cash in the bank ÷ net burn.
For example, with €600,000 in the bank and a net burn of €50,000 a month, the money lasts 12 months — if costs and revenue stay the same.
Below: the formulas with an example, why simple division almost always overstates runway, what a startup in Spain needs to add (employer social security, VAT, payment terms, ENISA loans), how to read the burn multiple and “default alive”, how much runway you need and when to start raising. The page includes a calculator with Spanish parameters.
What is burn rate: gross vs net
- Gross burn — all the money that left your accounts in the month: salaries with taxes and social security, rent, software, contractors, marketing.
- Net burn = gross burn − money received from customers in the same month.
Example: the month’s spending is €54,645 and customers paid €15,000. Gross burn is €54,645, net burn €39,645.
Count cash movements, not accounting accruals. Depreciation is not part of burn — it takes no cash.
One-off payments — equipment, a year’s software paid up front — are: the cash left in the month you paid.
To stop them distorting the picture, look at the average burn over 3 months.
How to calculate runway
Runway = cash in the bank ÷ net burn. With €400,000 in the bank and a net burn of €39,645, the money lasts 10.1 months.
Why simple division misleads
The formula assumes costs and revenue freeze in place. They never do:
- costs grow — new hires, pay rises, software that scales with customers;
- revenue grows, but reaches the bank late — customers pay in 30–60 days;
- there are one-off outflows — quarterly taxes, loan repayments, bonuses.
So runway is calculated month by month: opening balance + cash in − cash out. That is how the calculator below works.
A monthly cash plan is part of the financial model — see Financial model calculations: formulas, scenarios and assumptions.
Burn rate and runway calculator
Enter salaries gross: the calculator adds employer social security itself. Enter a loan or grant separately — it is a cash inflow, not revenue.
Startup burn in Spain: what to add
Employer social security on top of salaries
On a permanent contract, the employer pays on top of the gross salary: 23.60% common contingencies, 5.50% unemployment, 0.20% wage guarantee fund (FOGASA), 0.60% vocational training and 0.75% intergenerational equity mechanism (MEI).
Together, 30.65%. Add the workplace accident rate: 1.50% for office work. In total, about 32% on top of gross. On a fixed-term contract the unemployment rate is higher — 6.70%.
The rates apply to salary up to the contribution cap — €5,101.20 a month in 2026. An employee on €3,000 gross a month costs the company about €3,965.
The founder-director
A founder who runs and controls an SL is generally required to register as a self-employed company member — autónomo societario (art. 305.2(b) of the General Social Security Act).
Their contribution is a monthly payment that is often left out of burn when the founder takes no salary.
VAT: money that comes back late
The company pays VAT on its costs (21% standard rate) to suppliers straight away and recovers it later.
If deductible VAT exceeds the VAT charged — for example, there is no revenue yet, or customers are abroad and no Spanish VAT is charged — the excess is, as a rule, refunded only at the end of the last period of the year.
Monthly refunds are possible if the company is entered in the monthly refund register, REDEME (art. 30 of the VAT Regulation). Until it is refunded, that VAT is part of your burn.
Customer payment terms
Under the Late Payment Act (Ley 3/2004, art. 4), the payment term between businesses is 30 calendar days from receipt of the goods or service unless the contract says otherwise, and it can be agreed up to a maximum of 60 days.
So a month’s revenue reaches the bank the following month or the one after, while you pay salaries and rent now.
In the calculator, this is the “Customers pay after” field.
ENISA loans and grants are not revenue
An ENISA loan (préstamo participativo) or a grant increases your cash but does not reduce burn.
Treat it as a separate inflow in the month the money actually arrives, and do not forget when repayments start: with ENISA you first pay interest only, then the principal. Loan terms: Startup and small business support programmes in Spain.
Burn multiple: how efficiently you spend
Burn is not bad in itself: a startup spends in order to grow. The question is how much growth each euro buys. Investor David Sacks (Craft Ventures) proposed this metric:
Burn multiple = net burn for the period ÷ net new annual recurring revenue (ARR) for the same period.
Example: in a quarter, net burn is €120,000 and ARR grew from €300,000 to €380,000, an increase of €80,000.
Burn multiple = 1.5: to add €1 of annual revenue the company burns €1.50.
Sacks’s scale: under 1 — amazing, 1–1.5 — great, 1.5–2 — good, 2–3 — suspect, over 3 — bad.
The calculator above computes the burn multiple for the current month: net burn ÷ (monthly revenue increase × 12).
The metric works once you have recurring revenue. Before revenue, watch your runway and how quickly you are removing the key risks.
Default alive or default dead
Paul Graham, founder of accelerator Y Combinator, introduced the idea in a 2015 essay.
The question is simple: if expenses stay the same and revenue keeps growing as it has in recent months, will the money you have get you to profitability?
If yes, the company is default alive. If not, it is default dead: without new money it will close.
The calculator above answers this: it shows whether revenue reaches the level of costs before the cash runs out.
If the answer is no, you have two options: raise money before that date, or change your hiring and spending now, while you still have a buffer.
How much runway you need and when to start raising
Common practice is to raise enough for 18–24 months and to start the next round with at least 6–9 months of cash left.
Raising — from first meetings to money in the bank — often takes several months, and in Spain you add the notary and registration of the capital increase.
Raising with less than six months of runway means negotiating from weakness: the investor can see you have no choice.
How to prepare for a round in advance: How to prepare a project for investment.
How to extend runway
- Freeze hires that will not affect revenue in the next 6 months. People are the biggest line in burn.
- Speed up cash in: prepayment, annual plans with a discount, shorter payment terms in contracts.
- Review software and contractors: subscriptions grow unnoticed.
- Put VAT refunds and loans into the cash plan rather than keeping them in your head.
- Cut spending that does not move the key metric. How to find it: Startup unit economics.
Frequently asked questions
What is burn rate?
The speed at which a startup spends money: how much leaves the accounts each month. Gross burn is all spending; net burn is spending minus cash received from customers.
How do you calculate runway?
Runway = cash in the bank ÷ net burn. More precisely, month by month: balance + cash in − cash out, with growing costs and payment delays. The month the balance turns negative is the end of runway.
What is the difference between gross burn and net burn?
Gross burn is all the money that left in the month. Net burn is the same minus money that came in from customers. Runway is calculated on net burn.
How much runway should a startup have?
After a round, plans usually aim for 18–24 months. The next round starts with at least 6–9 months of cash left, because raising takes several months.
What is a good burn multiple?
Net burn ÷ net new annual recurring revenue for the same period. The lower, the more efficient the growth: around 1 or below is very good; above 3 is a reason to review spending.
Is VAT part of burn rate?
Input VAT on costs, yes, until it is refunded: the cash has already left your account. Count the refund as an inflow in the month the tax office actually pays it.
Should an ENISA loan count as revenue?
No. The loan increases your cash but does not reduce burn. Count it as a separate inflow, and interest and repayments as future outflows.
How much does an employee really cost in Spain?
The gross salary plus employer social security — about a third on top for a permanent contract, up to the contribution cap. The exact rate depends on the contract type and the workplace accident rate.
Key points on burn rate and runway
- Gross burn is all of the month’s spending; net burn is spending minus cash from customers.
- Runway = cash ÷ net burn, but the accurate answer comes from a monthly model with growing costs and payment delays.
- In Spain, add employer social security, the founder’s autónomo contribution, VAT until refunded and customer payment terms.
- Loans and grants are inflows, not revenue.
- The burn multiple shows how much growth each euro buys.
- Start a round while you still have at least six months of cash.
Sources
- Orden PJC/297/2026 — social security rates and contribution cap for 2026.
- Real Decreto-ley 3/2026 — workplace accident rates, office work 1.50%.
- General Social Security Act (RDL 8/2015) — art. 305.2(b).
- VAT Regulation (RD 1624/1992) — art. 30, monthly refund register.
- Late Payment Act (Ley 3/2004) — art. 4.
- ENISA — financing.
- David Sacks — The Burn Multiple (2020).
- Paul Graham — Default Alive or Default Dead? (2015).
