Burn Rate

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Burn rate is really your average monthly costs – it gives people a feeling for how much you spend in a given month. So, for instance, if you were nine months into the year and you had spent $653,000, year to date, on operating expenses, regardless of revenues coming in, your burn rate would be approx. $72,500 ($653,000 divided by nine months and rounded off). Because startups experience extreme contraction and expansion, you usually take an average of the previous twelve months expenses to smooth the metric out.

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