Calculate Your Runway
How long until you run out of cash? Calculate runway from burn rate.
Formula
Runway (months) = Current Cash Balance / Monthly Burn Rate
How to Calculate
Startup runway tells you how many months your business can operate before running out of cash, assuming no additional funding or revenue changes. The basic formula divides your current cash balance by your monthly net burn rate (total monthly expenses minus monthly revenue).
If your startup is pre-revenue, the calculation is straightforward: divide cash by total monthly expenses (gross burn rate). For startups with some revenue, use net burn rate (gross burn minus revenue). Be honest about revenue projections—use actual collected revenue, not pipeline or projected sales.
Consider multiple scenarios: a "worst case" where revenue stays flat or declines, a "base case" with modest growth, and a "best case" with your growth targets. The worst-case scenario is the most important for survival planning. Most advisors recommend maintaining at least 12–18 months of runway. Once runway drops below 6 months, fundraising or drastic cost-cutting becomes urgent.
Worked Example
A SaaS startup has $600,000 in the bank.
Monthly expenses (gross burn): Salaries: $65,000 Cloud hosting: $8,000 Office/co-working: $3,000 Marketing: $12,000 Software tools: $2,000 Legal/accounting: $1,500 Total: $91,500/month
Monthly revenue: $35,000 Net burn rate: $91,500 − $35,000 = $56,500/month
Runway: $600,000 / $56,500 = 10.6 months
If revenue grows 10% monthly, runway extends significantly. If revenue stalls, they have about 10 months to become profitable or raise capital.
Why It Matters
Runway is the most critical metric for startup survival. It determines when you need to raise your next round, when cost cuts become necessary, and how aggressively you can invest in growth. Running out of cash is the number one reason startups fail—not lack of product-market fit, but running out of money before finding it.
Practical Tips
- ✓Start fundraising when you have 9–12 months of runway—the process typically takes 3–6 months.
- ✓Model multiple scenarios (best, base, worst case) to understand your range of outcomes.
- ✓Focus on reducing net burn by growing revenue, not just cutting costs—revenue growth extends runway exponentially.
- ✓Track runway weekly, not monthly, when below 6 months—cash management becomes critical.
Frequently Asked Questions
What is a good runway for a startup?
What is the difference between gross burn and net burn?
When should I cut costs to extend runway?
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