Why IT Services Owners Should Care
For IT services companies and MSPs, burn rate shows how fast cash disappears each month. Monthly recurring revenue feels stable, but the costs supporting it (technicians, tools, vendor licenses) are equally fixed. Losing a client that represents 15% of revenue doesn't reduce your tooling or payroll costs by 15%. Your burn rate stays the same while revenue drops.
Industry Benchmarks
Negative (saving) to $60K/month
Healthy Range
$60K-90K/month
Warning Zone
Over $90K/month
Danger Zone
Industry context: These ranges are for MSPs with 5-12 people. Gross burn for small MSPs typically runs $40K-120K/month. Profitable MSPs should maintain negative net burn (saving money) most months. Cash reserves should cover 2-4 months of gross burn.
Source: IT services/MSP 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: Apex IT Solutions
Technician Salaries (8 People) Core team compensation | $48,000 |
Admin Staff (2 People) Office manager and bookkeeper | $8,500 |
Tooling Stack RMM, PSA, backup, security — fixed regardless of client count | $8,000 |
Office + Lab Office space and lab environment | $4,000 |
Vendor Licenses (Amortized) Monthly portion of annual vendor costs | $3,500 |
Marketing + BD Website, ads, partner events | $3,000 |
Insurance + Certs Liability, compliance, certifications | $2,500 |
Vehicles + Misc On-site service vehicles, other costs | $2,500 |
Total Gross Burn Total monthly spending | $80,000 |
Calculation
Gross burn: $80,000/month. Revenue: $100K/month. Net burn: -$20,000 (saving $20K)
With $100K/month revenue, net burn is -$20K (saving). But lose an $18K/month client: revenue drops to $82K, net burn drops to -$2K (barely saving). Lose one more $10K client: net burn flips to +$8K (losing). With $55K in reserves and $8K/month burn: 6.9 months of runway.
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Get My Free ScoreCommon Problems in IT Services
Symptom
Lost a $15K/month client but tooling and staffing costs stay flat
Impact
MRR drops 15% but burn stays at $80K. Net burn goes from -$20K to -$5K. One more loss and you're burning cash. The feeling of "stable recurring revenue" masks the risk.
How to Improve Your Burn Rate
How to do it
Total all annual vendor renewals. Divide by 12. Set aside that amount monthly in a dedicated vendor renewal fund. When renewals hit, the cash is ready.
Expected impact
Eliminates renewal-month spikes. A $36K annual Microsoft renewal becomes $3K/month provisioned. No more stressful renewal months.
Key Takeaways
What it measures
How much cash you're spending each month to run your business
Healthy range for IT Services
Negative (saving) to $60K/month
Formula in plain English
How much cash disappears from your bank account each month
Most common problem
Client churn with fixed costs
Fastest fix
Amortize annual vendor costs monthly
Related Financial Metrics
Other important metrics for IT Services
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.