How to Calculate Cash Runway and Burn Rate
Runway is the single number that tells a founder how long the business can keep operating at its current spend before the bank balance hits zero. It is built from your burn rate - how fast you are losing money each month - and it is the metric investors ask about first.
Burn rate first
Net burn is how much cash you lose in a typical month: total monthly costs minus monthly revenue. If you spend 15,000 a month and bring in 8,000, your net burn is 7,000. If revenue exceeds costs, you are cash-flow positive and have effectively infinite runway.
The runway formula
Example: 50,000 in the bank, burning 7,000 a month. Runway = 50,000 / 7,000 = about 7 months. That is roughly how long you have before you need more revenue, lower costs, or new funding.
Gross vs net burn
Gross burn is your total monthly spend. Net burn subtracts revenue. Runway uses net burn, because incoming revenue extends how long your cash lasts. As revenue grows, net burn shrinks and runway lengthens even if spending stays the same.
Account for one-off costs
A simple runway figure assumes steady monthly burn. Large one-off expenses - an annual software renewal, a tax bill, a new hire's setup - shorten runway when they land. Map known lump sums against the months they fall in, rather than averaging them away, so a big payment in month three does not surprise you.
What to do when runway gets short
Under six months of runway is the usual signal to act. The levers are: increase revenue, cut costs to lower burn, or raise money. Raising takes months, so the time to start is while you still have runway, not when you are nearly out. Every month of cost cut buys more than a month of runway because it compounds across the remaining balance.
Use the Cash Runway Calculator
The Cash Runway Calculator combines your cash balance, monthly revenue, fixed and variable costs, and any upcoming one-off expense to show your net burn and how many months you have left, so you can see the cliff edge before you reach it.
Frequently asked questions
How much runway should a business have?
Many founders aim to keep at least 12-18 months of runway, and to start raising money or cutting costs once it drops below six. The right buffer depends on how predictable your revenue is and how long fundraising takes in your market.
Does runway include money I am owed?
Use cash actually in the bank, not invoices outstanding. Money owed to you only helps once it is collected, and late payment is common. Counting unpaid invoices as runway is how businesses run out of cash while looking profitable on paper.
Use the tools
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