Why Consulting Firms Owners Should Care
For consulting firms, burn rate shows how fast cash disappears each month. The consulting-specific risk: client concentration. If one client represents 30% of revenue and they pause their engagement, your burn rate stays the same while revenue drops 30%. Knowing your burn rate and runway before that happens is the difference between a strategic response and a panic.
Industry Benchmarks
Negative (saving) to $30K/month
Healthy Range
$30K-50K/month
Warning Zone
Over $50K/month
Danger Zone
Industry context: Profitable firms should have negative net burn (saving money). During growth or slow periods, $10K-30K positive burn is common. Sustained burn over $50K/month without a funding plan is high risk.
Source: Consulting firm cash management benchmarks, 2025
How to Calculate Burn Rate
Formula
(Starting Cash Balance - Ending Cash Balance) / Number of Months
In plain English
How much cash disappears from your bank account each month
Example: Keystone Consulting Group
Monthly Expenses (Gross Burn) Consultant salaries, admin, office, all costs | $115,000 |
Monthly Revenue Average billings | $125,000 |
Net Burn Rate Saving $10K/month (negative burn) | -$10,000 |
Cash Reserves Available cash | $180,000 |
Calculation
Gross burn: $115,000/month. Revenue: $125,000/month. Net burn: -$10,000 (saving $10K)
Healthy: saving $10K/month. But run the stress test: lose the largest client ($35K/month). New revenue drops to $90K. Net burn flips to +$25K/month. With $180K in reserves, runway drops to 7.2 months. Enough time to replace the client if you act immediately. Wait 2 months and runway shrinks to 5.2 months.
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Get My Free ScoreCommon Problems in Consulting Firms
Symptom
One client represents 25%+ of total revenue
Impact
If that client pauses or churns, burn rate stays flat while revenue drops dramatically. A firm with $115K/month burn and 30% client concentration is 1 phone call from a cash crisis.
How to Improve Your Burn Rate
How to do it
Calculate: what happens to net burn rate if your largest client leaves? If runway drops below 6 months, you either need more reserves, more client diversification, or both.
Expected impact
Proactive awareness prevents reactive scrambling. Most firms discover their concentration risk is higher than they thought. This drives client diversification efforts.
Key Takeaways
What it measures
How much cash you're spending each month to run your business
Healthy range for Consulting Firms
Negative (saving) to $30K/month
Formula in plain English
How much cash disappears from your bank account each month
Most common problem
Client concentration risk
Fastest fix
Run the client concentration stress test monthly
Related Financial Metrics
Other important metrics for Consulting Firms
Current Ratio
How much money you have available to pay bills due in the next 30-90 days
Days Sales Outstanding (DSO)
How long it takes customers to pay you after you invoice them
Cash Flow
The movement of money in and out of your business over a specific period
Burn Rate in Other Industries
See how burn rate compares across different business types
Cleaning Companies
Cleaning company burn rate averages $2-4K/month for residential and $5-8K for commercial. See where your cash drain ranks and how to extend your runway.
Salons & Spas
Salon burn rate averages $3-5K/month for small shops and $6-10K for mid-size. Find out if your cash burn is healthy or a warning sign before it is too late.
Restaurants
Restaurant burn rate averages $5-10K/month for small spots and $10-20K for mid-size. New restaurants burn $20-40K. See how yours compares.
HVAC Contractors
HVAC burn rate averages $3-6K/month for 1-2 tech shops and $8-15K for mid-size crews. Seasonal swings make this metric critical. See the benchmarks.