Runway
Last reviewed 2026-05-11 by Asad Ali, Founder & CEO
The number of months a company can operate before running out of cash.
Runway is how long a business can continue operating at its current net burn rate before exhausting cash reserves and access to credit. It's a critical metric for startups, seasonal businesses, and any company not yet consistently profitable. Runway is typically calculated against unrestricted cash plus undrawn credit-line capacity — restricted cash (security deposits, escrow) doesn't count because it can't be deployed for operations. When runway drops below 6 months, leadership must either raise capital, cut costs aggressively, or accelerate revenue generation. Below 3 months, the company is in distress and may lose negotiating leverage with investors, vendors, and employees. Smart operators model two runway scenarios: base case (current burn) and bear case (assuming revenue drops 30–50% and one large customer churns) — the gap between the two is your real margin for error.
Formula
Runway (months) = (Unrestricted Cash + Undrawn Credit) ÷ Monthly Net Burn Rate. For lumpy revenue: use the 3-month trailing average of net burn.Example
A startup ends the month with $180,000 in cash plus a $50,000 undrawn line of credit ($230,000 available). Monthly net burn averaged $30,000 over the past three months. Runway = $230,000 ÷ $30,000 = roughly 7.7 months. If the team commits to a $40,000/month engineering hire, net burn rises to $40,000 and runway shrinks to 5.75 months — pushing the company into the fundraising danger zone. Cutting two SaaS subscriptions and one contractor for $5,000 in monthly savings extends runway to roughly 6.6 months — buying time to either land more revenue or close a round.
Why It Matters for Your Business
Knowing your runway lets you plan fundraising, hiring, and spending decisions before they become emergencies. The biggest preventable cause of startup failure is running out of cash with no early warning.
Practical Tips
- •Recalculate runway every month against a 3-month rolling burn average — not your best month, not your worst
- •Model a bear-case runway assuming one large customer churns and revenue drops 30% — the gap to your base case is your true margin for error
- •Start fundraising when runway hits 9–12 months; closing a round takes 3–6 months and investors smell desperation below 6
- •Keep at least 3 months of expenses in a separate operating reserve account — protects payroll if a customer payment slips or a fundraise stalls
Common Questions About Runway
How is runway calculated?
The formula is: Runway (months) = (Unrestricted Cash + Undrawn Credit) ÷ Monthly Net Burn Rate. For lumpy revenue: use the 3-month trailing average of net burn.. See the worked example below for a step-by-step calculation using realistic numbers.
What is an example of runway?
A startup ends the month with $180,000 in cash plus a $50,000 undrawn line of credit ($230,000 available). Monthly net burn averaged $30,000 over the past three months. Runway = $230,000 ÷ $30,000 = roughly 7.7 months. If the team commits to a $40,000/month engineering hire, net burn rises to $40,000 and runway shrinks to 5.75 months — pushing the company into the fundraising danger zone. Cutting two SaaS subscriptions and one contractor for $5,000 in monthly savings extends runway to roughly 6.6 months — buying time to either land more revenue or close a round.
Why does runway matter for my business?
Knowing your runway lets you plan fundraising, hiring, and spending decisions before they become emergencies. The biggest preventable cause of startup failure is running out of cash with no early warning.
How does FiscalInsights help with runway?
FiscalInsights tracks runway automatically as part of its AI bookkeeping workflow. Connect your bank accounts and the platform handles categorization, reconciliation, and reporting without manual entry.
Related Terms
More Cash-flow Terms
Burn Rate
The rate at which a company spends cash monthly.
Cash Flow
The movement of money in and out of a business.
Cash Flow Forecast
A projection of expected cash inflows and outflows.
Cash Flow Statement
A financial statement showing cash movements from operations, investing, and financing.
Free Cash Flow
Cash from operations minus capital expenditures.
Related Cash-flow Guides
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