Cash Burn by Department Calculator

When runway shrinks, founders face the same question: where do we cut? Making random cuts across all departments rarely works. A department-level analysis shows you where cost reduction has the least growth impact.

Step 1: Map burn by department

Before cutting, understand your current burn composition. For most Series A–B SaaS: - Engineering: 40–50% of headcount cost - Sales: 20–30% - Marketing: 10–20% - G&A: 10–15%

Step 2: Apply the ROI filter

Not all departments have equal ROI. Ask for each: what revenue or product output does this cost generate, and on what timeline?

Sales and marketing: high ROI if CAC payback < 18 months; cut demand gen before account executives. Engineering: rarely the right first cut unless you have product/market fit and are in pure monetisation mode. G&A: typically first to cut — contractors, software subscriptions, office costs.

Step 3: Cut to extend, not to survive

The goal of burn optimisation is to extend runway until your next value-creation milestone (ARR target, product launch, breakeven). Define the milestone first. Then cut to reach it with 3+ months buffer.

Benchmark: healthy burn multiples by stage

Burn multiple = net burn / net new ARR added. <1× is world-class efficiency.

Use the cash burn by department calculator to model your current burn composition and runway.

Burn rate is one of the most important metrics for pre-profitability startups. Here is everything you need to know to calculate and track it correctly.

The two burn rate formulas

Gross burn rate = total monthly cash outflow Sum of all salaries, rent, software, marketing, contractors, and other expenses.

Net burn rate = gross burn − monthly revenue The actual amount of cash you consume each month after revenue offset.

Runway = cash on hand ÷ net burn rate

Example

Cash in bank: $2,000,000 Monthly gross burn: $250,000 Monthly revenue: $50,000 Net burn: $250,000 − $50,000 = $200,000/month Runway: $2,000,000 ÷ $200,000 = 10 months

What investors look at

• Burn multiple = net burn ÷ net new ARR. <1× is efficient; >3× is burning unsustainably.
• Runway — standard expectation is 18+ months when closing a round.
• Month-over-month trend — is net burn increasing (growth mode), flat (scaling), or decreasing (efficiency improvements)?

How to track burn rate

1. Export all transactions from your bank/accounting software monthly
2. Categorise by department (engineering, sales, marketing, G&A)
3. Compare gross burn, net burn, and runway month-over-month
4. Tie to your ARR growth: burn multiple = net burn / net new ARR

Use the cash burn by department calculator to model your current burn composition and runway.

The ratio between engineering spend and sales & marketing spend is one of the clearest signals of what stage a company is actually in — regardless of what stage it claims to be.

Typical ratios by stage

What an unbalanced ratio signals

Engineering-heavy past growth stage (60%+ of spend on product while growth is healthy) often means go-to-market is under-resourced relative to product readiness — the company can build faster than it can sell.

Sales-heavy before PMF (large sales & marketing spend while engineering is thin) is a red flag: it usually means the company is trying to force growth on a product that isn't ready, which shows up later as high churn from customers who were sold on promises the product doesn't yet deliver.

Why this matters more than total burn alone

Two companies can have identical total burn and wildly different outcomes depending on allocation. A company burning $200k/month mostly on engineering pre-PMF is investing in the right thing; the same $200k/month split evenly with sales before the product is ready is often burning cash on customers who won't stick.

How to use this in a board conversation

Present department burn as a percentage of total, not just dollars, and track the trend quarter over quarter. A shifting ratio — engineering share declining as sales share rises — is the expected and healthy pattern as a company moves from building to scaling.

Frequently asked questions

Where does customer success/support spend fit? Usually tracked separately once it's material, since it scales with the existing customer base rather than acquisition — lump it with G&A or break it out as its own department once it exceeds roughly 10% of total burn.

Should this ratio include founder time, not just cash spend? For internal planning, yes — founder and early-employee time is real cost even if not cash burn. For investor-facing burn multiples, cash spend is the standard basis.

Use the Cash Burn by Department Calculator to see your own department split and compare it against the stage benchmarks above.