Reading your burn rate like a CFO: runway, ratios, and the numbers that matter
The number in your bank account is the least informative metric you have. By the time it's flashing red, the decisions that would have helped were needed six months ago. Real financial discipline is about leading indicators — five numbers that tell you what's about to happen, not what already did.
- Net burn matters more than gross burn — revenue counts.
- Runway should be measured against your worst plausible month, not your average.
- CAC payback under 12 months is healthy; over 18 is a warning.
- Default-alive is a choice, not a state — and it can be made on purpose.
The five numbers worth tracking weekly
Gross burn is your total monthly spend. Net burn is gross burn minus revenue. Runway is cash divided by net burn. CAC payback is months of gross margin needed to recover the cost of acquiring a customer. LTV:CAC is the ratio of customer lifetime value to acquisition cost — anything above 3:1 is healthy.
These five numbers, looked at together, tell you almost everything you need to know about your business's financial trajectory. Looked at separately, they each lie in different ways.
Runway against the worst plausible month
Founders compute runway against average burn. Reality runs against your worst month — the one where you hire two people, sign an annual SaaS contract, and lose a customer all in the same week.
Run the runway calculation against 1.3× average burn and assume revenue is flat (no growth). The answer that pops out is your real runway. If it's under nine months, fundraising or cuts need to start now — not in three months when the number gets scary.
Paul Graham's question: at your current growth rate, will you reach profitability before the money runs out? If no, you are default dead and didn't realize it. The whole job is converting that no to a yes — through revenue, cuts, or capital.
CAC payback is the most underrated metric
If it costs you $1,200 to acquire a customer who pays $100/month at 80% gross margin, your CAC payback is 15 months. Healthy SMB SaaS sits under 12. Enterprise can stretch to 18. Above 24 and you're effectively borrowing future revenue to fund present growth.
When CAC payback creeps up, it's almost always one of three causes: paid channels saturating, ICP drifting toward harder-to-close customers, or pricing too low. The fix is one of those three — not 'spend more on marketing.'
The conversation to have with yourself every quarter
If revenue stayed flat for the next 12 months, would the business survive? If not, what's the smallest cut today that makes the answer yes? Founders who run this calculation quarterly never get caught flat-footed. Founders who don't, do.
The hardest cut is the right one made early. Letting one person go in month 6 is dramatically less painful — for them and for you — than letting four people go in month 11 when there's no choice left.
- 30 minutes every Monday to update burn, MRR, runway against worst-month.
- Compare against last week, last month, and plan.
- If runway drops more than two months in a quarter, sound the alarm.
- Share the dashboard with at least one trusted advisor.
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